Article | Review of Economics and Statistics | May 2006

Diverging Trends in Macro and Micro Volatility

by Diego Comin and Sunil Mulani

Abstract

This paper documents the diverging trends in volatility of the growth rate of sales at the aggregate and firm level. We establish that the upward trend in micro volatility is not simply driven by a compositional bias in the sample studied. We argue that this new fact sheds some shadows on the proposed explanations for the decline in aggregate volatility and that, given the symmetry of the diverging trends at the micro and macro level, a common explanation is likely. We conclude by describing one such theory.

Keywords: Volatility; Mathematical Methods; Theory; Sales; Growth and Development;

Citation:

Comin, Diego, and Sunil Mulani. "Diverging Trends in Macro and Micro Volatility." Review of Economics and Statistics (May 2006).