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On the Relationship Between Cross-Sectional and Time Series Measures of Uncertainty

Author

Listed:
  • Ciaran Driver
  • Lorenzo Trapani
  • Giovanni Urga

Abstract

In this paper, we provide a coherent theoretical investigation of the relationship between cross-section and time series measures of uncertainty, which are often employed as perfect substitutes in empirical applications. The main finding of our analysis is that there exists an ambiguous sign in the discrepancy between the two measures of uncertainty arising from the presence of cross-sectional dependence amongst individuals. Thus our study underpins the importance of accounting for cross-sectional dependence, in line with recent inferential theory of panel data models.

Suggested Citation

  • Ciaran Driver & Lorenzo Trapani & Giovanni Urga, 2008. "On the Relationship Between Cross-Sectional and Time Series Measures of Uncertainty," Working Papers 0803, Department of Management, Information and Production Engineering, University of Bergamo.
    • Handle: RePEc:brh:wpaper:0803
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    File URL: http://hdl.handle.net/10446/411
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    More about this item

    Keywords

    Cross-section and Time series; expectations; uncertainty; GARCH Models;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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