Idiosyncratic Shocks, Geographic Spillovers, and Asset Prices∗
نویسنده
چکیده
This paper shows that productivity shocks to the top 100 U.S. companies (as identified in Gabaix (2011)) contain systematic information. Specifically, shocks to the top 100 firms predict future shocks to geographically close firms. Intra-sector trade links are an important economic channel for the cascade effect. However, these geographic spillovers are not only restricted to firms’ explicit interactions. State income tax payments is another dominant channel through which the shocks propagate. Market participants, including equity analysts, do not fully incorporate the geographic information contained in shocks to top 100 firms. Consequently, a trading strategy that exploits the slow diffusion of information generates an annual risk-adjusted return of 7.5%.
منابع مشابه
Private information, growth, and asset prices with stochastic disturbances
We introduce both idiosyncratic and aggregate shocks in an endogenous growth model with endogenous partial insurance to the idiosyncratic shock. Aggregate uncertainty introduces an additional channel that can play an important role in determining the effects of private information on expected growth and asset prices. We show the impact of aggregate and idiosyncratic shocks on expected growth an...
متن کاملA Review of the Impact of Monetary Policy Shocks and Asset Markets' Behavior on Affordability of Urban Housing Prices in Iran
The purpose of this paper is to study the behavior of the housing price affordability index in the urban areas of Iran during the 1992-2017 period, and to explain the effect of monetary policy shocks and asset marketschr('39') performance on this index during the referred period. The Granger Cointegration Test was used to study the behavior of the mentioned index and the SVAR Model was applied ...
متن کاملHousehold-Level Consumption in Urban Ethiopia: The Impact of Food Price Inflation and Idiosyncratic Shocks
We use survey data to investigate how urban households in Ethiopia coped with the food price shock in 2008 and idiosyncratic shocks. Qualitative data indicate that the high food price inflation was by far the most adverse economic shock between 2004 and 2008, and that a significant proportion of households had to adjust food consumption in response. Regression results indicate that households w...
متن کاملInvestment Waves under Cross Learning∗
We investigate how firms’ cross learning amplifies industry-wide investment waves. Firms’ technologies are subject to idiosyncratic shocks and a common shock, and their asset prices aggregate speculators’ private information about the two types of shocks. In investing, each firm learns from other firms’ prices (in addition to its own) to make better inference about the common shock, leading to ...
متن کاملThe Macroeconomic Effects of Asset Price Shocks in a Globalized Financial Market
This paper studies a model where shocks to asset prices affect the real sector of the economy through a credit channel. As financial markets become internationally integrated, the economy becomes less vulnerable to domestic asset price shocks, but more vulnerable to foreign asset price shocks. To the extent that monetary policy stabilization is feasible and desirable, the globalization of finan...
متن کامل