Patterns of Comovement: The Role of Information Technology in the U.S. Economy

50 Pages Posted: 15 Dec 2004 Last revised: 20 Feb 2015

See all articles by Hyunbae Chun

Hyunbae Chun

Sogang University - Department of Economics

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

Jung-Wook Kim

Seoul National University - Graduate School of Business

Jason Lee

University of Alberta

Date Written: November 2004

Abstract

Firm-specific variation in stock returns and fundamental performance measures is significantly higher in industries that have a history of more investment in information technology (IT). We hypothesise that IT is associated with creative destruction or product differentiation, either of which can widen the performance difference between winner and loser firms. Thus, economy-level volatility can fall while firm-level volatility rises because firm-specific volatility cancels out in the aggregate. Our results are consistent with rising firm-specific variation in US stocks reflecting a rising pace of creative destruction; and with greater firm-specific variation in richer and faster growing countries reflecting more intensive creative destruction in those economies, though other explanations are probably valid as well.

Suggested Citation

Chun, Hyunbae and Morck, Randall K. and Kim, Jung-Wook and Lee, Jason, Patterns of Comovement: The Role of Information Technology in the U.S. Economy (November 2004). NBER Working Paper No. w10937. Available at SSRN: https://ssrn.com/abstract=625568

Hyunbae Chun

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/

Randall K. Morck (Contact Author)

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

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governence Institute ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Asian Bureau of Finance and Economic Research ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Jung-Wook Kim

Seoul National University - Graduate School of Business ( email )

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

Jason Lee

University of Alberta ( email )

Edmonton, Alberta T6G 2R6
Canada
780-492-4839 (Phone)
780-492-3325 (Fax)

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