Inventory Heterogeneity

41 Pages Posted: 30 Sep 2007

See all articles by Richard K. Lai

Richard K. Lai

The Wharton School, Univ. of Pennsylvania

Date Written: December 27, 2005


Firms have very different inventory levels. How much of this heterogeneity is due to differences among firms, versus among industries? Using all observations in COMPUSTAT for 1950 through 2004, we find that both industry and firm effects are significant. Further, firm effects are as strong as, if not stronger, than industry effects. In our baseline model, firm effects explain 33.1% of inventory heterogeneity; industry effects, 19.3%. These findings are robust to a number of sensitivity tests. Apart from the empirical contribution, the findings can be a useful stylized fact for further theoretical development into the origins of inventory heterogeneity.

Keywords: Inventory, inventory heterogeneity, firm effects, industry effects

JEL Classification: D24, D82, M11, E32

Suggested Citation

Lai, Richard K., Inventory Heterogeneity (December 27, 2005). Harvard NOM Working Paper No. 06-09. Available at SSRN: or

Richard K. Lai (Contact Author)

The Wharton School, Univ. of Pennsylvania ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215 898 1630 (Phone)

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