Cross-Sectional Uncertainty and the Business Cycle: Evidence from 40 Years of Options Data

Ian Dew-Becker and Stefano Giglio

American Economic Journal: Macroeconomics, 2023, vol. 15, issue 2, 65-96

Abstract: This paper presents a novel and unique measure of cross-sectional uncertainty constructed from stock options on individual firms. Cross-sectional uncertainty varied little between 1980 and 1995 and subsequently had three distinct peaks—during the tech boom, the financial crisis, and the coronavirus epidemic. Cross-sectional uncertainty has had a mixed relationship with overall economic activity, and aggregate uncertainty is much more powerful for forecasting aggregate growth. The data and moments can be used to calibrate and test structural models of the effects of uncertainty shocks. In international data, we find similar dynamics and a strong common factor in cross-sectional uncertainty.

JEL-codes: D21 D81 E23 E24 E32 G13 O34 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mac.20210136 (application/pdf)
https://doi.org/10.3886/E150921V1 (text/html)
https://www.aeaweb.org/doi/10.1257/mac.20210136.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Cross-sectional uncertainty and the business cycle: evidence from 40 years of options data (2021)
Working Paper: Cross-Sectional Uncertainty and the Business Cycle: Evidence from 40 Years of Options Data (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmac:v:15:y:2023:i:2:p:65-96

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/mac.20210136

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().