Cross-sectional uncertainty and the business cycle: evidence from 40 years of options data

Stefano Giglio and Ian Dew-Becker

No 16306, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 un- certainty 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.

Date: 2021-06
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP16306 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Cross-Sectional Uncertainty and the Business Cycle: Evidence from 40 Years of Options Data (2023)
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:cpr:ceprdp:16306

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP16306

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().