On the Relationship Between Cross-Sectional and Time Series Measures of Uncertainty

Ciaran Driver, Lorenzo Trapani () and Giovanni Urga

No 803, Working Papers from Department of Management, Information and Production Engineering, University of Bergamo

Abstract: In this paper, we provide a coherent theoretical investigation of the relationship between cross-section and time series measures of uncertainty, which are often employed as perfect substitutes in empirical applications. The main finding of our analysis is that there exists an ambiguous sign in the discrepancy between the two measures of uncertainty arising from the presence of cross-sectional dependence amongst individuals. Thus our study underpins the importance of accounting for cross-sectional dependence, in line with recent inferential theory of panel data models.

Keywords: Cross-section and Time series; expectations; uncertainty; GARCH Models (search for similar items in EconPapers)
JEL-codes: C21 C22 (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:brh:wpaper:0803

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