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Working Paper

Cross-Sectoral Variation in Firm-Level Idiosyncratic Risk

In this paper we use data from the U.S. Census Bureau’s Longitudinal Research Database in order to assess the extent of the cross-sectoral variation in firm-level idiosyncratic risk and shed light on its determinants. We find that firms producing investment goods exhibit greater volatility in sales and TFP growth than firms producing consumption goods. Our data suggests that this may be the case because winner-takes-all competition is more common for the former than for the latter.

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Castro, Rui, Luca Clementi Gian, and Yoonsoo Lee. 2009. “Cross-Sectoral Variation in Firm-Level Idiosyncratic Risk.” Federal Reserve Bank of Cleveland, Working Paper No. 08-12.