We use a factor model with stochastic volatility to decompose the time-varying variance of Macro economic and Financial variables into contributions from country-specific uncertainty and uncertainty common to all countries. We find that the common component plays an important role in driving the...

A growing empirical literature has considered the impact of uncertainty using SVAR models that include proxies for uncertainty shocks as endogenous variables. In this paper we consider the possible impact of measurement error in the uncertainty shock proxies on the estimated impulse responses...

This paper estimates the impact on the US economy of four types of uncertainty about (i) government spending, (ii) tax changes, (iii) public debt sustainability and (iv) monetary policy. Following a one standard deviation shock, uncertainty about debt sustainability has the largest and most...

This paper investigates if the impact of uncertainty shocks on the US economy has changed over time. To this end, we develop an extended Factor Augmented VAR model that simultaneously allows the estimation of a measure of uncertainty and its time-varying impact on a range of variables. We find...

Financial markets are central to the transmission of uncertainty shocks. This paper documents a new aspect of the interaction between the two by showing that uncertainty shocks have radically different macroeconomic implications depending on the state financial markets are in when they occur....

This paper uses a FAVAR model with stochastic volatility to estimate the impact of uncertainty shocks on real income growth in US states. The results suggest that there is a large degree of heterogeneity in the magnitude and the persistence of the response to uncertainty shocks across states....

Hedge fund managers are compensated via management fees on the assets under management (AUM) and incentive fees indexed to the high-water mark (HWM). We study the effects of managerial skills (alpha) and compensation on dynamic leverage choices and the valuation of fees and investors' payoffs....

We develop a model of pandemic risk management and firm valuation. We introduce aggregate transmission shocks into an epidemic model and link valuations to infections via an asset-pricing framework with vaccines. Infections lower earnings growth but firms can mitigate damages. We estimate a...

We develop an integrated theory of investment, seasoned equity offerings (SEOs), liquidation, and corporate savings under uncertainty for a financially constrained firm, which features endogenous growth options, abandonment options, and payout policies. Facing costly external financing, the firm...

The real options framework has been used extensively to analyze the timing of investment under uncertainty. While standard real options models assume that agents possess a constant rate of time preference, there is substantial evidence that agents are very impatient about choices in the...