Another new working paper of mine came out this week, this time with @CarstensenKai Stefan Lautenbacher and Martin Schneider from @Stanford
This paper characterizes firm-level subjective uncertainty both in the cross-section and its dynamics and compares it with measures and
This paper characterizes firm-level subjective uncertainty both in the cross-section and its dynamics and compares it with measures and
https://twitter.com/cepr_org/status/1456577374473043969
dynamics of forecast errors. We use high-quality German firm survey data from @ifo_Institut to do this. Results: (1) firms in turbulent environments and on non-zero trends tend to be more uncertain, as are smaller firms. (2) Firms on positive growth trends and large firms are
less uncertain than they should be, given the forecast errors they make. (3) There is substantial subjective both cross-sectional and time-series heteroskedasticity in the data. (4) Firms with bad AND good experiences in the recent past are more uncertain, more so with bad
experiences. (5) What matters for this relationship is the bad experience, NOT that it was a surprise bad experience. (6) There is persistence in subjective uncertainty. (7) The dynamics of subjective uncertainty looks like cond. volatility dynamics estimated with GARCH models.
Bottom line: firm managers understand the dynamics of the uncertainty environment they find themselves in. But cross-sectionally, successful (growing and large) firms get a bit overconfident.
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