Good And Bad Uncertainty
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Good And Bad Uncertainty
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Author : Gill Segal
language : en
Publisher:
Release Date : 2020
Good And Bad Uncertainty written by Gill Segal and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
Does macroeconomic uncertainty increase or decrease aggregate growth and asset prices? To address this question, we decompose aggregate uncertainty into 'good' and 'bad' volatility components, associated with positive and negative innovations to macroeconomic growth. We document that in line with our theoretical framework, these two uncertainties have opposite impact on aggregate growth and asset prices. Good uncertainty predicts an increase in future economic activity, such as consumption, output, and investment, and is positively related to valuation ratios, while bad uncertainty forecasts a decline in economic growth and depresses asset prices. Further, the market price of risk and equity beta of good uncertainty are positive, while negative for bad uncertainty. Hence, both uncertainty risks contribute positively to risk premia, and help explain the cross-section of expected returns beyond cash flow risk.
Financial Uncertainty And Real Activity
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Author : Giovanni Caggiano
language : en
Publisher:
Release Date : 2020
Financial Uncertainty And Real Activity written by Giovanni Caggiano and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
This paper quantifies the finance uncertainty multiplier (i.e., the magnifying effect of the real impact of uncertainty shocks due to financial frictions) by relying on two historical events related to the US economy, i.e., the large jump in financial uncertainty occurred in October 1987 (which was not accompanied by a deterioration of the credit supply conditions), and the comparable jump in financial uncertainty in September 2008 (which went hand-in-hand with an increase in financial stress). Working with a VAR framework and a set-identification strategy which focuses on - but it is not limited to - restrictions related to these two dates, we estimate the finance uncertainty multiplier to be equal to 2, i.e., credit supply disruptions are found to double the negative output response to an uncertainty shock. We then employ our model to estimate the overall economic cost of the COVID-19-induced uncertainty shock under different scenarios. Our results point to the possibility of a cumulative yearly loss of industrial production as large as 31% if credit supply gets disrupted. Liquidity interventions that keep credit conditions as healthy as they were before the COVID-19 uncertainty shock are found to substantially reduce such loss.
Global Bad And Good Uncertainties And Their Impact On Macro Aggregates And Stock Returns
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Author : Michael Semenischev
language : en
Publisher:
Release Date : 2016
Global Bad And Good Uncertainties And Their Impact On Macro Aggregates And Stock Returns written by Michael Semenischev and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
This paper estimates global bad and good uncertainties from monthly data on industrial production from a large set of countries. Bad and good uncertainties have opposite effects on macro aggregates and stock returns. An increase in bad uncertainty adversely impacts both, while an increase in good uncertainty has positive effects. This holds for many considered countries. Furthermore, global uncertainties help to explain stock returns in the cross-section. The pricing performance of the global CAPM and two-factor model of Fama and French (1998) always improve if the pricing factors are scaled with global uncertainties. Bad uncertainty is important in conomic distress times. In contrast, good uncertainty helps to explain returns in calm times. Overall, the results highlight the opposite effect of bad and good uncertainty and show that both are key drivers of real economies and financial markets.
Good Times Or Bad Times Investors Uncertainty And Stock Returns
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Author : Arzu Ozoguz
language : en
Publisher:
Release Date : 2008
Good Times Or Bad Times Investors Uncertainty And Stock Returns written by Arzu Ozoguz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
This paper investigates empirically the dynamics of investors' beliefs and Bayesian uncertainty on the state of the economy as state variables that describes the time-variation in investment opportunities. Using measures of uncertainty constructed from the state probabilities estimated from two-state regime-switching regime models of aggregate market return, and of aggregate output, I find a negative relationship between the level of uncertainty and asset valuations. This relationship shows substantial cross-sectional variation across portfolios sorted on size, book-to-market and past returns, especially conditional on the state of the economy. I show that a conditional model with investors' beliefs and uncertainty risk factor, is remarkably successful in explaining a large part of the cross-sectional variation in average portfolio returns. The uncertainty risk factor retains its incremental explanatory power when contrasted with other economically-motivated factors such as GDP news, or other conditional models such as (C)CAPM.
Uncertainty And Monetary Policy In Good And Bad Times
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Author : Giovanni Caggiano
language : en
Publisher:
Release Date : 2017
Uncertainty And Monetary Policy In Good And Bad Times written by Giovanni Caggiano and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
Uncertainty And Monetary Policy In Good And Bad Times
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Author : Giovanni Caggiano
language : en
Publisher:
Release Date : 2017
Uncertainty And Monetary Policy In Good And Bad Times written by Giovanni Caggiano and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
Uncertainty Deconstructed
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Author : Bruce Garvey
language : en
Publisher: Springer Nature
Release Date : 2022-08-26
Uncertainty Deconstructed written by Bruce Garvey and has been published by Springer Nature this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-08-26 with Business & Economics categories.
This book argues that uncertainty is not really uncertainty at all but just demonstrates a lack of vision and willingness to think about the unthinkable – good and bad. The task of accepting that uncertainty is about exploring the possible, rather than the impossible has to be taken on board by strategists, policy developers, and political leaders, if we are to meet the challenges that an ever changing world is throwing at us. The term “unknown – unknowns” is ubiquitous, albeit the vast majority of future uncertain events do not fall into this category. However, it has been used to absolve decision makers from criticism post-event, whereas poor foresight is the prime culprit and that most future uncertainties are “known-unknowns” or “inevitable surprises”. This re-positioning of uncertainties can help mitigate the impact of such risks through better foresight aware contingency planning. The enemy is not uncertainty itself but our lack of imagination when trying to visualize the future – we need to transform our behaviour. To better understand uncertainty we have to deconstruct it and get to grips with its component parts. Three main questions are posed and practical approaches presented: What are the main structural components that make up the conditions under which uncertainty operates? What scenario lenses can be used when exploring uncertainty? What behavioural factors do we need to consider when analysing the human responses to uncertainty? Practitioners, having to deal with making better decisions under uncertainty, will find the book a useful guide. Endorsements for the book: "With this book, Bruce Garvey performs a great service for consultants, planners and, indeed, anyone whose job involves a degree of speculation about what will happen in the future. Through a comprehensive survey of methods, tools and techniques, he provides a practical guide to unpacking the uncertainty that besets all human endeavour. This is no dry academic treatise: it deals with highly contemporary topics such as “fake news” – part of a fascinating dissection of “dark data” – and how our biases and preconceptions shape our views. The book finishes with three case studies dealing with the Covid-19 pandemic, social mobility and inequality, and achieving net zero – all topics that are sorely in need of the critical thinking and analysis skills described previously. No one can completely eliminate “20:20 hindsight” from all business decisions but readers applying the lessons of this book may find themselves saying “if only we’d known...” less frequently." -- Nick Bush, Director - CMCE (Centre for Management Consulting Excellence) "Academic literature and practical guides to uncertainty management are disparate: this exciting edition brings it all together. Principal author, Bruce Garvey, recognises the erroneous attribution of many recent events to unforeseeable uncertainty (‘unknown unknowns’), calling these out as inevitable surprises (or ‘unknown knowns’), a category of uncertainty that is typically overlooked. Garvey describes critical dimensions of uncertainty, before examining scenarios and behavioural aspects, the latter being a ‘hidden influencer’ which is too often neglected. The guidebook contains a variety of methods, tools and techniques, including several that deserve more use, and contains a detailed glossary and reference list. Practical advice covers topics such as identifying weak signals for use in scenario development and overcoming cognitive dissonance. This well-structured and engagingly written guide should serve as a standard text for students, academics and practitioners across policy making, business, and industry." -- Dr. Geoff Darch, Water Resources Strategy Manager, Anglian Water. Co-Founder, Analysis under Uncertainty for Decision-Makers (AU4DM) Network "This is a valuable companion volume to John Kay and Mervyn King's Radical Uncertainty - and it is a necessary corrective to the physics envy of disciplines such as economics which achieve a false sense of certainty by creating highly plausible but unreliable simplifications of things through over generalisation - leading to simplistic proposals for interventions which can only rightly be judged through a lens of complexity and probability. I would like to be more optimistic about the ultimate effects of books of this kind - and in some fields, perhaps in military decision-making and defence I am quite optimistic. In such fields, people tend to approach decision-making through the assumption that things will go wrong, and that the effects of any mistakes will be very keenly, perhaps fatally experienced. In business and softer social policy-making, I fear the battle will be much harder. In such fields as politics and business, it is often better for the reputation "as Keynes remarked, "to fail conventionally than to succeed unconventionally." In such fields, it is more important to make defensible decisions than to make good decisions, so an artificial sense of logical certainty will perhaps always hold an unhealthy appeal. But here's hoping anyway!" -- Rory Sutherland, Vice Chairman, Ogilvy Group "Here is a most insightful book, which holistically examines the ‘world of uncertainty', particularly as it impacts sense- to decision-making processes for many different stakeholders. Both scholars and practitioners, strategists to operators, soon gain from reading. Journeying from theory to practice, we embark on a comprehensive definition of uncertainty to subsequently become better equipped for its greater contemporary navigation when going forward, all elucidated by several well-structured scenarios and case-study examples. How uncertainty relates to risk (both qualitative and quantitative) is systematically charted, articulating their close interactivity. Forming a successful guide, this book has much enduring reference value and is therefore deserving of being readily retrievable as events and developments benefit from their improved understanding. Uncertainty can demonstrably be negotiated much more effectively. Alternative situations and conditions of denial, lamented as ‘we should have (fore)seen that’, no longer stand as acceptable when it comes to anticipating futures ahead. With this book, further help is now at hand." -- Adam D.M. Svendsen, PhD, International Intelligence & Defence Strategist, Researcher, Analyst, Educator & Consultant
Risk Uncertainty And Profit
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Author : Frank H. Knight
language : en
Publisher: Courier Corporation
Release Date : 2012-03-09
Risk Uncertainty And Profit written by Frank H. Knight and has been published by Courier Corporation this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-03-09 with Business & Economics categories.
DIVThis enduring economics text provided the theoretical basis of the entrepreneurial American economy during the post-industrial era. A revolutionary work, it taught the world how to systematically distinguish between risk and uncertainty. /div
Uncertainty And Monetary Policy In Good And Bad Times
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Author : Giovanni Caggiano
language : en
Publisher:
Release Date : 2020
Uncertainty And Monetary Policy In Good And Bad Times written by Giovanni Caggiano and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
This paper revisits the well-known VAR evidence on the real effects of uncertainty shocks by Bloom (Econometrica 2009(3): 623-685. doi: 10.3982/ECTA6248). We replicate the results in a narrow sense using Eviews. In a wide sense, we extend his study by working with a smooth transition-VAR framework that allows for business cycle-dependent macroeconomic responses to an uncertainty shock. We find a significantly stronger response of real activity in recessions. Counterfactual simulations point to a greater effectiveness of systematic monetary policy in stabilizing real activity in expansions.
Can Stock Volatility Be Benign New Measurements And Macroeconomic Implications
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Author : Yu-Fan Huang
language : en
Publisher:
Release Date : 2019
Can Stock Volatility Be Benign New Measurements And Macroeconomic Implications written by Yu-Fan Huang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
The Great Recession has motivated economists to investigate financial uncertainty shocks as potentially important drivers of economic fluctuations. However, not all of the factors affecting financial uncertainty could cause economic downturns. In this paper, we find non-synchronized movements of two new measures of financial market uncertainty -- good and bad volatility -- which are based on the maximum and minimum stock prices within a month. Good (bad) volatility is associated with better (worse) expectations about the future economic situation and clearly signals acceleration (deceleration) in economic activity. We further investigate the importance of financial uncertainty implied by the new measures. The VAR results indicate that (1) output, employment, and stock price plummet rapidly in response to a bad volatility shock, while their responses to a good volatility shock are modest, and (2) bad volatility shocks explain the bulk of economic activity and stock price fluctuations in the medium run. These results suggest that bad volatility shocksare harmful to the economy and drive business cycle fluctuations. Distinguishing between these two types of financial uncertainty is crucial in understanding the roles that financial uncertainty plays in economic fluctuations.
