<p>Macroeconomic Uncertainty and Expected Stock Returns is a recent paper (<a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2407279" rel="nofollow">Bali, Brown, and Tang (2015)</a>) finds an economically important effect on uncertainty on returns. </p>

<blockquote>
  <p>This paper introduces a broad index of macroeconomic uncertainty based
  on ex-ante measures of cross-sectional dispersion in economic
  forecasts by the Survey of Professional Forecasters. We estimate
  individual stock exposure to a newly proposed measure of economic
  uncertainty index and find that the resulting uncertainty beta
  predicts a significant proportion of the cross-sectional dispersion in
  stock returns. After controlling for a large set of stock
  characteristics and risk factors, we find the predicted negative
  relation between uncertainty beta and future stock returns remains
  economically and statistically significant. The significantly negative
  uncertainty premium is robust to alternative measures of uncertainty
  index and distinct from the negative market volatility risk premium
  identified by earlier studies.</p>
</blockquote>

<p>Dynamic co-movements of stock market returns, implied volatility and policy uncertainty (<a href="http://www.sciencedirect.com/science/article/pii/S0165176513001754" rel="nofollow">Antonakakisa, Chatziantonioua, and Filisb (2013)</a>) finds that policy uncertainty, as measured by <a href="http://www.policyuncertainty.com/media/BakerBloomDavis.pdf" rel="nofollow">Baker, Bloom, and Davis (2013)</a>, has an unconditional correlation with the Vix of about 0.43. But using a DCC_Garch they find episodes when this correlation was negative, which may be surprising. </p>

CC BY-SA 3.0
2015-04-01T14:52:32.513Z
2015-04-01T14:52:32.513Z
BKay
<p>Bloom (2009) analyzes the impact of <em>uncertainty shocks</em>, and Bloom et al (2014) propose a business cycle model based on these shocks.</p>

<p>It seems to be a young field, but is there any consensus on strength and weaknesses of this new shock? Is it the answer to some puzzles such as the risk premium puzzle? </p>

<p>What is the opinion of the literature about this field, and is there already a handbook chapter on this?</p>

CC BY-SA 3.0
2015-11-09T04:51:12.983Z
Bloom also gave a nice lecture at the 2014 Annual meeting of the Society for Economic Dynamics on this topic. Here is the link for the video and slides (https://www.economicdynamics.org/sed2014/)
emeryville
CC BY-SA 3.0
2015-03-31T11:24:56.077Z
Bloom has a JEP [paper](https://www.aeaweb.org/articles.php?doi=10.1257/jep.28.2.153) on the topic, but I haven't yet seen more extensive survey/review.
ivansml
<academic-graduate><reference-request><uncertainty>
What's the status on uncertainty shocks?
FooBar
# What's the status on uncertainty shocks?

(Asked by: username_0 on 2015-03-30)

Bloom (2009) analyzes the impact of *uncertainty shocks*, and Bloom et al (2014) propose a business cycle model based on these shocks.

It seems to be a young field, but is there any consensus on strength and weaknesses of this new shock? Is it the answer to some puzzles such as the risk premium puzzle?

What is the opinion of the literature about this field, and is there already a handbook chapter on this?

**Tags:** academic-graduate, reference-request, uncertainty
> **Comments:**
> **username_2**: Bloom has a JEP [paper](https://www.aeaweb.org/articles.php?doi=10.1257/jep.28.2.153) on the topic, but I haven't yet seen more extensive survey/review.  
> **username_1**: Bloom also gave a nice lecture at the 2014 Annual meeting of the Society for Economic Dynamics on this topic. Here is the link for the video and slides (https://www.economicdynamics.org/sed2014/)  

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## 1 answers

### Answer by username_3 on 2015-04-01. Score: 1

Macroeconomic Uncertainty and Expected Stock Returns is a recent paper ([Bali, Brown, and Tang (2015)](http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2407279)) finds an economically important effect on uncertainty on returns.

> This paper introduces a broad index of macroeconomic uncertainty based
> on ex-ante measures of cross-sectional dispersion in economic
> forecasts by the Survey of Professional Forecasters. We estimate
> individual stock exposure to a newly proposed measure of economic
> uncertainty index and find that the resulting uncertainty beta
> predicts a significant proportion of the cross-sectional dispersion in
> stock returns. After controlling for a large set of stock
> characteristics and risk factors, we find the predicted negative
> relation between uncertainty beta and future stock returns remains
> economically and statistically significant. The significantly negative
> uncertainty premium is robust to alternative measures of uncertainty
> index and distinct from the negative market volatility risk premium
> identified by earlier studies.

Dynamic co-movements of stock market returns, implied volatility and policy uncertainty ([Antonakakisa, Chatziantonioua, and Filisb (2013)](http://www.sciencedirect.com/science/article/pii/S0165176513001754)) finds that policy uncertainty, as measured by [Baker, Bloom, and Davis (2013)](http://www.policyuncertainty.com/media/BakerBloomDavis.pdf), has an unconditional correlation with the Vix of about 0.43. But using a DCC\_Garch they find episodes when this correlation was negative, which may be surprising.


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