Productivity Growth and Stock Returns: Firm- and Aggregate-Level Analyses

47 Pages Posted: 20 Sep 2013

See all articles by Hyunbae Chun

Hyunbae Chun

Sogang University - Department of Economics

Jung-Wook Kim

Seoul National University - Graduate School of Business

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: September 2013

Abstract

Technological innovation is not a blessing for all firms, or for investors holding the market. In the late 20th century US, individual firms' stock returns correlate positively with their own productivity growth, yet the market return correlates negatively with aggregate productivity growth, yet. This seeming fallacy of composition reflects Schumpeterian creative destruction: a few technology winners' stocks rise with their rising productivity while many technology losers' stocks fall with their declining productivity. Thus, most individual firms' stock returns correlate negatively with aggregate productivity growth. Analogous reasoning explains prior findings that the market return correlates negatively with aggregate earnings.

Suggested Citation

Chun, Hyunbae and Kim, Jung-Wook and Morck, Randall K., Productivity Growth and Stock Returns: Firm- and Aggregate-Level Analyses (September 2013). NBER Working Paper No. w19462. Available at SSRN: https://ssrn.com/abstract=2328507

Hyunbae Chun (Contact Author)

Sogang University - Department of Economics ( email )

Seoul, 121-742
Korea, Republic of (South Korea)
+82-2-705-8515 (Phone)
+82-2-704-8599 (Fax)

HOME PAGE: http://hompi.sogang.ac.kr/hchun/

Jung-Wook Kim

Seoul National University - Graduate School of Business ( email )

Seoul, 151-742
Korea, Republic of (South Korea)

Randall K. Morck

University of Alberta - Department of Finance and Statistical Analysis ( email )

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Edmonton, Alberta T6G 2R6
Canada
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780-492-3325 (Fax)

National Bureau of Economic Research (NBER)

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European Corporate Governence Institute ( email )

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Asian Bureau of Finance and Economic Research ( email )

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Singapore, 117592
Singapore

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