Extensive Margin Adjustment of Multi-Product Firm and Risk Diversification.
Carvalho, Carlos,
Extensive Margin Adjustment of Multi-Product Firm and Risk Diversification. [electronic resource] / Carlos Carvalho. - 1 online resource (44 pages) - IMF Working Paper ; WP/17/146 . - IMF working paper ; WP/17/146. .
Cover; Table of Contents; 1 Introduction; 2 The Relationship between Extensive Margin Adjustment and Asset Price Under CCAPM; 3 Data Description; 4 Empirical Findings; 4.1 Extensive Margin Adjustment Rate is Sticky -- 4.2 Comparison between High vs Low Product Turnover Groups; 4.3 Portfolio Analysis; 4.4 Extensive margin Adjustment and Risk; 4.5 Robustness Check; 5 A Dynamic Model of Extensive Margin Adjustment; 5.1 Household; 5.2 Price of the Product; 5.3 Firm's Decision on Optimal Product Scope: Without Friction; 5.4 Firm's Decision on Optimal Product Scope: A Calvo-type Model. 5.5 Model Summary5.6 Return Rate; 5.7 Parametrization; 5.8 Simulation; 6 Conclusion; References; Appendix.
Product scope adjustment is a key mechanism through which multi-product firms achieve efficient resource allocations. In this paper, we take a novel perspective to study firms' product scope adjustment behavior through the lens of asset pricing. Using a unique panel scanner data set containing detailed information on products, matched with the financial information of their manufacturers, we find that multi-product firms with higher product turnover have lower financial risks and lower risk premia. To understand this channel, we propose a stylized model with a time-dependent (Calvo-type) product turnover rate to highlight the 'risk absorption channel' of product scope adjustment. In response to an economy-wide shock, a firm that can adjust its product scope more flexibly shows lower excess equity returns and lower asset volatility.
1484303768 9781484303764 1484307046 9781484307045
10.5089/9781484303764.001 doi
1021682 MIL
Asset Pricing.
Business Objectives Of The Firm.
Firm Performance: Size, Diversification, And Scope.
Size Distribution Of Firms.
Prices--Econometric models.
Capital assets pricing model.
Risk management.
Electronic books.
HG3810 / .I45
338.52
Extensive Margin Adjustment of Multi-Product Firm and Risk Diversification. [electronic resource] / Carlos Carvalho. - 1 online resource (44 pages) - IMF Working Paper ; WP/17/146 . - IMF working paper ; WP/17/146. .
Cover; Table of Contents; 1 Introduction; 2 The Relationship between Extensive Margin Adjustment and Asset Price Under CCAPM; 3 Data Description; 4 Empirical Findings; 4.1 Extensive Margin Adjustment Rate is Sticky -- 4.2 Comparison between High vs Low Product Turnover Groups; 4.3 Portfolio Analysis; 4.4 Extensive margin Adjustment and Risk; 4.5 Robustness Check; 5 A Dynamic Model of Extensive Margin Adjustment; 5.1 Household; 5.2 Price of the Product; 5.3 Firm's Decision on Optimal Product Scope: Without Friction; 5.4 Firm's Decision on Optimal Product Scope: A Calvo-type Model. 5.5 Model Summary5.6 Return Rate; 5.7 Parametrization; 5.8 Simulation; 6 Conclusion; References; Appendix.
Product scope adjustment is a key mechanism through which multi-product firms achieve efficient resource allocations. In this paper, we take a novel perspective to study firms' product scope adjustment behavior through the lens of asset pricing. Using a unique panel scanner data set containing detailed information on products, matched with the financial information of their manufacturers, we find that multi-product firms with higher product turnover have lower financial risks and lower risk premia. To understand this channel, we propose a stylized model with a time-dependent (Calvo-type) product turnover rate to highlight the 'risk absorption channel' of product scope adjustment. In response to an economy-wide shock, a firm that can adjust its product scope more flexibly shows lower excess equity returns and lower asset volatility.
1484303768 9781484303764 1484307046 9781484307045
10.5089/9781484303764.001 doi
1021682 MIL
Asset Pricing.
Business Objectives Of The Firm.
Firm Performance: Size, Diversification, And Scope.
Size Distribution Of Firms.
Prices--Econometric models.
Capital assets pricing model.
Risk management.
Electronic books.
HG3810 / .I45
338.52