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Creative Destruction, Stock Return Volatility, and the Number of Listed Firms

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  • Söhnke M. Bartram
  • Gregory W. Brown
  • René M. Stulz

Abstract

Average idiosyncratic volatility and firm idiosyncratic volatility increase with the number of listed firms. Average industry idiosyncratic volatility increases with the number of listed firms in the industry. We ex-plain the relation between idiosyncratic volatility and the number of listed firms through Schumpeterian creative destruction. We show that Schumpeterian creative destruction increases as the number of listed firms increases. However, there is no consistent evidence of an incremental effect of the number of non-listed firms on idiosyncratic volatility either in the aggregate or at the industry level, suggesting that listed firms play a unique role in the dynamism of the economy.

Suggested Citation

  • Söhnke M. Bartram & Gregory W. Brown & René M. Stulz, 2024. "Creative Destruction, Stock Return Volatility, and the Number of Listed Firms," NBER Working Papers 32568, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32568
    Note: AP CF
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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