Tools
Tools
Straub, Ludwig and Ulbricht, Robert
(2016)
Endogenous Second Moments: A Unified Approach to Fluctuations in Risk, Dispersion, and Uncertainty.
TSE Working Paper, n. 16-664, Toulouse
Preview |
Text
Download (521kB) | Preview |
Abstract
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.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | English |
| Date: | June 2016 |
| Place of Publication: | Toulouse |
| Uncontrolled Keywords: | Cross-sectional dispersion, endogenous uncertainty, monotone likelihood ratio property, nonlinear transformations, risk, second moments, volatility |
| JEL Classification: | C19 - Other D83 - Search; Learning; Information and Knowledge; Communication; Belief E32 - Business Fluctuations; Cycles G13 - Contingent Pricing; Futures Pricing |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Institution: | Université Toulouse 1 Capitole |
| Site: | UT1 |
| Date Deposited: | 21 Jun 2016 12:36 |
| Last Modified: | 27 Oct 2021 13:36 |
| OAI Identifier: | oai:tse-fr.eu:30521 |
| URI: | https://publications.ut-capitole.fr/id/eprint/22149 |
