Chris Dillow is sceptial and gives a good overview.
Stumbling and Mumbling: Firm volatility and macro stability: "For me, there;s a puzzle here. How do we reconcile this claim with the finding by John Campbell and colleagues, that firm-level volatility has been rising relative to market volatility since the 1960s (with correlations between stocks trending down)?"
I think that increased flexibility of firms must help to stabilise the economy. I am not sure that the stock market is a good indication of the underlying volatility of firm performance. I guess I don't fully accept EMH.
Marginal Revolution also have the story.
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