Youchang Wu

wird sein Paper "Production Networks and Stock Returns: The Role of Creative Destruction" vorstellen.

Die Veranstaltung findet in Raum TC 4.12 von 12:00-13:00 statt.

Abstract: We study the relation between firms' risk and their upstreamness in a production network. Empirically, the monthly return spread between upstream and downstream firms is 105 bps. We quantitatively explain this novel spread using a multi-layer general equilibrium model. The spread arises from vertical creative destruction -- innovations by suppliers devalue customers’ assets-in-place. We confirm several model predictions, and document additional new facts consistent with vertical creative destruction: a diminished value premium among downstream firms and a negative relation between downstream firms’ returns and their suppliers’ competitiveness. Overall, vertical creative destruction has a sizable effect on cross-sectional risk premia.