CE Director Dr. Michael A. Williams, and CE co-authors Brijesh P. Pinto and David Park publish article entitled “Global evidence on the distribution of firm growth rates” in Physica A: Statistical Mechanics and its Applications

 
CE Director Dr. Michael A. Williams, and CE co-authors Brijesh P. Pinto and David Park published an article in Physica A: Statistical Mechanics and its Applications entitled “Global evidence on the distribution of firm growth rates.” 

The article explores the best method to approximate the distribution of firm growth rates. The research builds on prior work on the distribution of firm growth rates, but uses a richer database than prior studies and tests for more theoretical distributions. The authors present empirical distribution function, or EDF, tests for the log of the sales growth rate for eight distributions: Cauchy, exponential, gamma, Laplace, logistic, log-normal, normal, and Weibull, and conclude that while the Laplace distribution does reasonably well, the distribution of firm growth rates is best approximated by the heavier-tailed Cauchy distribution. As there are not, to date, any theoretical models existing in which firm growth rates follow a Cauchy distribution, the authors’ results invite research on dynamic models of competition in which firms’ growth rates follow this type of distribution.

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