R2 and the economy

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)143-166
Journal / PublicationAnnual Review of Financial Economics
Volume5
Online published4 Sept 2013
Publication statusPublished - Nov 2013
Externally publishedYes

Abstract

The characterization of firm-specific return volatility as the intensity with which firm-specific events occur reconciles many seemingly discordant results. A functionally efficient stock market allocates capital to its highest value uses, which often amounts to financing Schumpeterian creative destruction, wherein creative winner firms outpace destroyed losers, who could be the previous year's winners. This rise in firm-specific fundamentals volatility elevates firm-specific return volatility in a sufficiently informationally efficient stock market. These linkages are interconnected feedback loops rather than unidirectional chains of causality.

Research Area(s)

  • creative destruction, economic development, market efficiency, stock returns comovement, synchronicity

Citation Format(s)

R2 and the economy. / Morck, Randall; Yeung, Bernard; Yu, Wayne.
In: Annual Review of Financial Economics, Vol. 5, 11.2013, p. 143-166.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review