Uncertainty & Ambiguity in Finance
Measuring, pricing, and hedging the fact that investors do not know the true distribution of returns.
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2 min read
Breaking Bad: Parameter Uncertainty Caused by Structural Breaks in Stocks
This paper introduces break-age, a novel measure for parameter uncertainty caused by structural breaks, and demonstrates its significance in stock pricing.
lukas-salcher
Parameter Uncertainty, Financial Turbulence and Aggregate Stock Returns
In this paper, we develop a novel, intuitive and objective measure of time-varying parameter uncertainty (PU) based on a simple statistical test.
Sebastian Stöckl
Turbulence in the Cross-Section: Predicting Factor Premia
We show that parameter uncertainty based on the turbulence within each cross-section of factor portfolios produces a significant out-of-sample forecast for six out of seven tested …
Sebastian Stöckl