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Identifying Preference for Early Resolution from Asset Prices

Author

Listed:
  • Hengjie Ai
  • Ravi Bansal
  • Hongye Guo
  • Amir Yaron

Abstract

This paper develops an asset market-based test for preference for the timing of resolution of uncertainty. Our main theorem provides a characterization of preference for early resolution of uncertainty in terms of the risk premium realized during the period when the informativeness of macroeconomic announcements is resolved. Empirically, we find support for preference for early resolution of uncertainty based on evidence on the dynamics of the implied volatility of S&P 500 index options before Federal Open Market Committee announcements.

Suggested Citation

  • Hengjie Ai & Ravi Bansal & Hongye Guo & Amir Yaron, 2026. "Identifying Preference for Early Resolution from Asset Prices," American Economic Review, American Economic Association, vol. 116(6), pages 2242-2281, June.
    • Handle: RePEc:aea:aecrev:v:116:y:2026:i:6:p:2242-81
    DOI: 10.1257/aer.20221351
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    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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