Diverging Trends in Macro and Micro Volatility: Facts

Abstract

In this paper we document the diverging trends in volatility of the growth rate of sales at the aggregate and firm level. The upward trend in micro volatility is not driven by a compositional bias in the sample studied. We also show that many other firm level variables display a similar upward trend in volatility. Finally, we argue that this new fact renders obsolete the proposed explanations for the decline in aggregate volatility and that, given the symmetry of the patterns at the micro and macro level, a common explanation is highly likely.Macro Volatility and Micro Volatility