Firm Networks and Asset Returns

80 Pages Posted: 21 Feb 2017 Last revised: 28 Feb 2018

See all articles by Carlos Ramírez

Carlos Ramírez

Board of Governors of the Federal Reserve System

Date Written: 2017-01


This paper argues that changes in the propagation of idiosyncratic shocks along firm networks are important to understanding variations in asset returns. When calibrated to match key features of supplier-customer networks in the United States, an equilibrium model in which investors have recursive preferences and firms are interlinked via enduring relationships generates long-run consumption risks. Additionally, the model matches cross-sectional patterns of portfolio returns sorted by network centrality, a feature unaccounted for by standard asset pricing models.

Keywords: Asset returns, Firm networks, Shock propagation

JEL Classification: C02, C6, D53, E32, G12, L10

Suggested Citation

Ramírez, Carlos, Firm Networks and Asset Returns (2017-01). FEDS Working Paper No. 2017-014. Available at SSRN: or

Carlos Ramírez (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States


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