American Economic Journal: Macroeconomics
no. 2, April 2023
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 uncertainty 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 international data, we find similar dynamics and a strong common factor in cross-sectional uncertainty.
Dew-Becker, Ian, and Stefano Giglio.
"Cross-Sectional Uncertainty and the Business Cycle: Evidence from 40 Years of Options Data."
American Economic Journal: Macroeconomics,
Firm Behavior: Theory
Criteria for Decision-Making under Risk and Uncertainty
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Business Fluctuations; Cycles
Contingent Pricing; Futures Pricing; option pricing
Intellectual Property and Intellectual Capital