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Radical uncertainty: Sources, manifestations and implications

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  • Müller, Christian

Abstract

This paper argues that radical uncertainty is the outcome of standard market activity. The theoretical findings are corroborated with empirical analyses. The model example is applied to asset pricing and radical uncertainty is found a solution to various asset pricing "puzzles". In conclusion, radical uncertainty should form the basis of economic analysis.

Suggested Citation

  • Müller, Christian, 2015. "Radical uncertainty: Sources, manifestations and implications," Economics Discussion Papers 2015-41, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:201541
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    References listed on IDEAS

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    More about this item

    Keywords

    rational expectations; uncertainty; subjectivity;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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