Measuring uncertainty in the stock market

Helena Chuliá, Montserrat Guillén and Jorge Uribe

International Review of Economics & Finance, 2017, vol. 48, issue C, 18-33

Abstract: We propose a daily index of time-varying stock market uncertainty. The index is constructed after first removing the common variations in the series, based on recent advances in the literature that emphasize the difference between risk (expected variation) and uncertainty (unexpected variation). To this end, we draw on data from 25 portfolios sorted by size and book-to-market value. This strategy considerably reduces information requirements and modeling design costs, compared to previous proposals. We also compare our index with indicators of macro-uncertainty and estimate the impact of an uncertainty shock on the dynamics of macroeconomic variables.

Keywords: E00; E44; G10; G14; Uncertainty; Risk; Factor models; Stock market (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056016302672
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Measuaring Uncertainty in the Stock Market (2015)
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:eee:reveco:v:48:y:2017:i:c:p:18-33

DOI: 10.1016/j.iref.2016.11.003

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().