If uncertainty in the core business drives diversification, then diversification should occur more often when the target industry has low uncertainty. Adopting an industry-dyad view of diversification, we investigate whether uncertainty spread, the difference in uncertainty levels between...

Precautionary pricing and increasing markups in representative-agent DSGE models with nominal rigidities are commonly used to generate negative output effects of uncertainty shocks. We assess whether this theoretical model channel is consistent with the data. Three things stand out. First,...