Uncertainty is Change

Kai Carstensen, Ruediger Bachmann, Martin Schneider and Stefan Lautenbacher

VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy from Verein für Socialpolitik / German Economic Association

Abstract: This paper provides survey evidence on firms’ subjective uncertainty about future sales growth from a new representative panel data set of the German manufacturing sector. The main finding is that uncertainty reflects change: firms report more subjective uncertainty after either high or low growth realizations. In the cross section of firms, subjective uncertainty differs from statistical measures of uncertainty such as volatility: fast-growing and large firms report lower subjective uncertainty than fast-shrinking and small firms, respectively, even if they face shocks of similar size. In contrast, the substantial time variation in firm-specific subjective uncertainty resembles that in conditional volatility: both measures of uncertainty are mildly persistent and rise more when growth is temporarily low.

Keywords: expectation formation; firms; measurement; subjective uncertainty; survey data (search for similar items in EconPapers)
JEL-codes: C83 D22 E23 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-bec
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc18:181572

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