| Description |
1 online resource (44 pages). |
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text file |
| Series |
IMF Working Paper ; WP/17/146
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IMF working paper ; WP/17/146.
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| Summary |
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. |
| Contents |
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. |
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5.5 Model Summary5.6 Return Rate; 5.7 Parametrization; 5.8 Simulation; 6 Conclusion; References; Appendix. |
| Local Note |
eBooks on EBSCOhost EBSCO eBook Subscription Academic Collection - North America |
| Subject |
Prices -- Econometric models.
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Prices -- Econometric models. |
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Capital assets pricing model.
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Capital assets pricing model. |
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Risk management.
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Risk management. |
| Genre/Form |
Electronic books.
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| Other Form: |
Print Version: Carvalho, Carlos. Extensive Margin Adjustment of Multi-Product Firm and Risk Diversification. Washington, D.C. : International Monetary Fund,2017 9781484303764 |
| ISBN |
1484303768 |
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9781484303764 |
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9781484303764 |
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1484307046 (e-book) |
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9781484307045 (electronic book) |
| Standard No. |
10.5089/9781484303764.001 |
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