TY  - RPRT
CY  - Toulouse
ID  - publications22149
UR  - http://tse-fr.eu/pub/30521
A1  - Straub, Ludwig
A1  - Ulbricht, Robert
Y1  - 2016/06//
N2  - Many important statistics in macroeconomics and finance—such as cross-sectional dispersions, risk, volatility, or uncertainty—are second moments. In this paper, we explore a mechanism by which second moments naturally and endogenously fluctuate over time as nonlinear transformations of fundamentals. Specifically, we provide general results that characterize second moments of transformed random variables when the underlying fundamentals are subject to distributional shifts that affect their means, but not their variances. We illustrate the usefulness of our results with a series of applications to (1) the cyclicality of the cross-sectional dispersions of macroeconomic variables, (2) the dispersion of MRPKs, (3) security pricing, and (4) endogenous uncertainty in Bayesian inference problems.
PB  - TSE Working Paper
T3  - TSE Working Paper
KW  - Cross-sectional dispersion
KW  - endogenous uncertainty
KW  - monotone likelihood ratio property
KW  - nonlinear transformations
KW  - risk
KW  - second moments
KW  - volatility
M1  - working_paper
TI  - Endogenous Second Moments: A Unified Approach to Fluctuations in Risk, Dispersion, and Uncertainty
AV  - public
EP  - 33
ER  -