Cross-Sectional Uncertainty and the Business Cycle: Evidence from 40 Years of Options Data
American Economic Journal-Macroeconomics
; 15(2):65-96, 2023.
Article
in English
| Web of Science | ID: covidwho-2327781
ABSTRACT
This paper presents a novel and unique measure of cross-sectional uncertainty constructed from stock options on individual firms. Cross-sectional uncertainty varied little between 1980 and 1995 and subsequently had three distinct peaks-during the tech boom, the financial crisis, and the coronavirus epidemic. Cross-sectional uncer-tainty has had a mixed relationship with overall economic activity, and aggregate uncertainty is much more powerful for forecasting aggregate growth. The data and moments can be used to calibrate and test structural models of the effects of uncertainty shocks. In interna-tional data, we find similar dynamics and a strong common factor in cross-sectional uncertainty. (JEL D21, D81, E23, E24, E32, G13, O34)
Full text:
Available
Collection:
Databases of international organizations
Database:
Web of Science
Type of study:
Observational study
/
Randomized controlled trials
Language:
English
Journal:
American Economic Journal-Macroeconomics
Year:
2023
Document Type:
Article
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