Hedging Macroeconomic and Financial Uncertainty and Volatility

Ian Dew-Becker, Stefano Giglio and Bryan T. Kelly

No 26323, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the pricing of uncertainty shocks using a wide-ranging set of options that reveal premia for macroeconomic risks. Portfolios hedging macro uncertainty have historically earned zero or even significantly positive returns, while those exposed to the realization of large shocks have earned negative premia. The results are consistent with an important role for "good uncertainty". Options for nonfinancials are particularly important for spanning macro risks and good uncertainty. The results dictate the role of uncertainty and volatility in structural models and we show they are consistent with a simple extension of the long-run risk model.

JEL-codes: E32 G12 G13 (search for similar items in EconPapers)
Date: 2019-09
New Economics Papers: this item is included in nep-mac and nep-rmg
Note: AP ME
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Citations: View citations in EconPapers (8)

Published as Ian Dew-Becker & Stefano Giglio & Bryan Kelly, 2021. "Hedging macroeconomic and financial uncertainty and volatility," Journal of Financial Economics, vol 142(1), pages 23-45.

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Related works:
Journal Article: Hedging macroeconomic and financial uncertainty and volatility (2021)
Working Paper: Hedging macroeconomic and financial uncertainty and volatility (2020)
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