A MICRO-BASED PERSPECTIVE ON FIRMS’ AGGREGATED SALES GROWTH VOLATILITY

This dissertation develops a framework to compute sales growth volatility for several aggregates of Portuguese firms (industry, municipality, and the whole economy). This is done using a dataset with roughly 170 thousand firms from 2008 to 2022. A high-dimensional factor model is employed to estimate the covariance matrix, capturing firm-level interdependencies. As expected, aggregated volatility peaks during recessions and decreases in normal times. My measure is consistently lower than the standard deviation of the mean sales growth rate for all the aggregations. Possible explanations are discussed. This work highlights the importance of firms’ interdependencies and offers a framework for risk aggregation.