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We propose uncertainty shocks as a new shock that drives business cycles. First, we demonstrate that microeconomic uncertainty is robustly countercyclical, rising sharply during recessions, particularly during the Great Recession of 2007-2009. Second, we quantify the impact of timevarying...
Persistent link: https://www.econbiz.de/10013055640
Uncertainty faced by individual firms appears to be heterogeneous. In this paper, I construct new empirical measures of firm-level uncertainty using data from the I/B/E/S and Compustat. These new measures reveal persistent differences in the degree of uncertainty facing individual firms not...
Persistent link: https://www.econbiz.de/10011401309
We investigate the effect of uncertainty on investment. We employ a unique dataset of 25000 Greek firms' balance sheets for 14 years covering the period before and after the eurozone crisis. A dynamic factor model is employed to proxy uncertainty. The investment performance of 14 sectors is...
Persistent link: https://www.econbiz.de/10012060122
This paper shows that, contrary to common beliefs, the real options effect of uncertainty plays no role in the long run rate of investment. This is proven for both the standard investment model with Cobb-Douglas production and Brownian motion demand, and also for a broader class of models with...
Persistent link: https://www.econbiz.de/10014036567
, investment irreversibility, and time-varying risk premia. In my model, firms have a precautionary-savings motive and real options … to wait, both of which interact with time-varying uncertainty and are reinforced by state-dependent risk premia. My model … the observed firm behaviors in high uncertainty states, and (2) time-varying risk premia amplify the impact of the …
Persistent link: https://www.econbiz.de/10012983559
although risk can be measured, uncertainty cannot be measured. Even though risk can be measured, a simple symmetric measure … attempt at "measuring" risk or (fundamental) uncertainty is flawed. …
Persistent link: https://www.econbiz.de/10011543578
The aim of this work is to give an overview on nonlinear expectation and to relate them to other concepts that describe model uncertainty or imprecision in a probabilistic framework. We discuss imprecise versions of stochastic processes with a particular interest in imprecise Markov chains....
Persistent link: https://www.econbiz.de/10012135809
Persistent link: https://www.econbiz.de/10011899740
This paper analyzes the optimal production and hedging decisions of a competitive firm holding optimism and pessimism under price ambiguity. We show that the separation theorem remains intact as the firm's optimal output level depends neither on the output price distribution nor on the firm's...
Persistent link: https://www.econbiz.de/10012972918
firm-level capital investment, risk management, and debt issuance. The effects of uncertainty vary significantly by firm … capital investment is significantly weaker for firms that hedge their output price risk. Our analysis highlights that, in the … ability to hedge risk exposures …
Persistent link: https://www.econbiz.de/10012974060