Times Of High Uncertainty Research Articles

Ambiguous investor sentiment

This study examines the interaction between investor sentiment, ambiguity, and asset pricing. While the existing literature highlights the importance of sentiment in times of higher uncertainty, our study further shows the nuanced distinction between ambiguity and standard uncertainty. We examine their effects on the relationship between sentiment and future stock market returns at the daily and monthly frequencies. Our analysis demonstrates that ambiguity weakens the predictive ability of sentiment on stock returns, whereas standard uncertainty increases it. We also present additional evidence suggesting that lower market participation during periods of high ambiguity is the likely driver of this effect.

New transformer procurement concepts in times of high uncertainty and market instability

New and proactive strategies are required in utilities and other transformer purchasers to ensure delivery of transformer capital investment plans in the current times of market saturation and various supply chain issues. Close collaboration with suppliers and adaptative and flexible engineering and commercial initiatives need to be implemented from as early stage in the project lifecycle as definition of requirements and tendering. This paper presents the strategy adopted by SP Energy Networks, and one of their main suppliers of power transformers, Kolektor Etra, in this regard.

Exchange rate pass-through for European Union countries.

Exchange rate pass-through (ERPT) represents a degree to which changes in nominal exchange rates are transmitted into domestic prices. European Union (EU) countries have experienced the unprecedented inflationary pressure due to high geopolitical risk events. As such, understanding the ERPT plays a crucial role. This study provides a comprehensive and up-to-date analysis of ERPT to import prices for 16 EU countries from January 2006 to December 2022. Using the panel autoregressive distributed lag (ARDL) model, our findings confirm the linear, rather than nonlinear, ERPT pattern characterized by a diminishing trend over time in the EU countries. However, the degree of pass-through varies depending on country characteristics. Specifically, countries that are highly dependent on imports experience a larger ERPT. Furthermore, the degree of pass-through to import prices is more significant and persistent during periods of high uncertainty. These findings are robust across various robust analyses including sub periods. Our findings provide that help policymakers evaluate the trade-offs between exchange rate risks and macroeconomic stability during times of high uncertainty.

Is Pakistan's Financial Distress Guilty of Accounting Misrepresentation? A Manager's Mediating Role Due to Overconfidence

This study's main goal is to determine the connection between accounting misrepresentation, managerial overconfidence, and financial distress among managers. Research indicates that there is a considerable correlation between financial distress and accounting misrepresentation. This problem has two aspects. Firstly, the management is under pressure to show the business's performance anytime there is financial trouble, but in reality, the business's performance deteriorates as a result of the financial distress. Stated differently, managers tend to manipulate their financial records at times of high uncertainty in order to win over the trust of their stakeholders and shareholders. Finally, the possibility of accounting fraud materializes if the firm's assessments, which are intended to avert charges of incapacity, are not met. A panel data regression model will be utilized to perform an empirical analysis of the hypothesis. For this study, panel data regression analysis was selected because it provides thorough insights into both cross-sectional and time-series data. The dataset includes data from 30 Pakistani companies that are listed on the Pakistan Stock Exchange, selected to represent a sample of the country's economy between 2010 and 2022. The study lays the groundwork for future investigations by recommending the use of corporate governance to control financial distress, managerial overconfidence, and accounting misstatement.

Can we breathe a sigh of relief now? The impact of First Republic Bank takeover by JP Morgan on the US equity markets

This paper investigates the effects of the takeover of First Republic Bank (FRB) by JP Morgan Chase on different US equity indices. Results from an event-study approach reveal that this acquisition exerts no significant impact on US equity markets, indicating that these markets in the US are relatively immune to extreme shocks and therefore, could act as a safe haven for investors during times of high uncertainty.

Uncertainty, credit and investment: Evidence from firm-bank matched data

This paper studies how high uncertainty affects corporate bank loans, addressing the important issue of identification. In times of high uncertainty, firms reduce their credit demand due to delayed investments or a deterioration in credit worthiness. Simultaneously, banks are more exposed to negative shocks to their balance sheet, reducing credit supply. To isolate the uncertainty effect from the credit supply effect, we employ matched bank-firm loan data covering all loans extended by all financial intermediaries to listed firms in Korea, a bank-centered economy. Our empirical results reveal that a failure to control for credit supply leads to overestimating the effect of uncertainty on bank loans. In terms of the transmission channel of uncertainty, we find the evidence of both the real option channel and the financial channel: the negative effect is stronger for firms with a higher degree of investment irreversibility and financially constrained firms. In addition, our findings suggest that larger firms may be predominantly affected by uncertainty shocks through the real option channel rather than the financial channel. In addition, our empirical findings on firm investments align with those on bank loans.

Towards the Next Pandemic–What Have We Learned? Insights of a Large Tertiary Care Hospital

Introduction:The first cases of COVID-19 arrived in Israel in March 2020. In Israel, the first known cases were Israeli patients diagnosed with COVID-19 aboard the Diamond Princess which were repatriated.Shortly later, additional cases were found in increasing numbers constituting the "first wave". The high number of patients put significant strain on Israeli hospitals. The initial wave was later followed by additional surges in the number of patients further straining the system. At the peak, hospitals with a total bed capacity of 800 had 135 covid-19 patients with 21 of them requiring ventilatory support.Method:Daily and weekly multidisciplinary meetings were held and daily reports were composed. Following each wave, lessons learned and recommendations for improved preparedness were formulated. The following results and conclusion sections summarize some of the main insights and recommendations.Results:The main challenges in Beilinson hospital during the "first wave" were a shortage of personal protective equipment (PPE) and how to best utilize the existing supplies, uncertainty regarding infectiveness, best management practices and uncertainty regarding the expected magnitude and duration of the pandemic. In retrospect, the major insights were the need for a flexible and divisible ED to safely care for changing loads of suspected and verified COVID-19 patients as well as COVID-19 negative patients. Increasing the in-hospital stockpile of PPE as well as the regional and national stockpile and creating local production capacities. The importance of the daily multidisciplinary managerial meeting was to improve situational awareness and allow improved decision making. Staff briefing occurred on a daily basis and during times of high uncertainty at the beginning of every shift.Conclusion:Performing structured and frequent debriefing and analysis to achieve clinical and operational insights is crucial for improved short-term performance as well as improving preparedness for future challenges.

COVID-19, firm performance, and the value relevance of earnings

In the wake of the COVID-19 crisis, there has been a growing interest in investigating how stock markets behave during times of uncertainty and crisis. This is because it has been shown that stock prices seem to disconnect from fundamentals during moments of extreme uncertainty. Using earnings and returns data from publicly traded corporations for the twelve months beginning January 1, 2020, we assessed the performance of major industrial sectors during COVID-19. We also investigated the concurrent earnings/returns relation to discover whether earnings changes convey useful information during times of high uncertainty. Following prior literature along similar lines, we used firm-level earnings and returns data and estimated cross-sectional regressions to examine the earnings/returns relation. We found considerable variation in the earnings and returns data across and within the industrial sectors. Our results mostly showed a positive relationship between accounting income and concurrent stock returns, implying that accounting earnings numbers were value relevant during the pandemic. Positive earnings news (earnings increases) seemed to generate a greater market response than negative earnings news (earnings drops), leading to a shift in the overall stock market's outlook from negative to positive in the second half of 2020. These findings will help the decision-making of investors, creditors, policymakers, financial analysts, and other stakeholder groups.

The study of mindfulness as an intervening factor for enhanced psychological well-being in building the level of resilience.

By using a practice like mindfulness, people may become more adaptable and flexible in difficult situations, which lowers the levels of unfavorable experiences. Only a small number of research have examined the connection between mindfulness and resilience, with mindfulness as a source of PWB influencing millennials' resilience when faced with adversity. This study sought to close this gap by exploring the role that mindfulness practice plays in millennials' PWB and subsequent increases in resilience to adversity. In this study, key components linked to mindfulness, PWB, and resilience are combined with a thorough literature assessment. Millennials who are active members of the Ti-Ratana Youth in Malaysia and the Buddhist Missionary Society of Malaysia (BMSM) Youth Section make up the study's sample population. Before completing the online survey form, each participant was instructed to engage in 4 weeks of supervised mindfulness practice. To assure the validity of the data gathered, it was crucial to secure the youth's commitment. Only 231 of the 300 respondents who received the link to the online survey had replies that could be used for further research. To analyze the collected data and conduct hypothesis testing, Smart-PLS was used. Academic research has shown that factors, such as a heavy workload, time constraints, lengthy workdays, work-related home conflicts, and an unstable and uncertain environment all lead to a drop in PWB. According to the findings, the two most significant variables promoting resilience are mindfulness and positive PWB. The outcomes of this experimental study confirmed earlier findings that millennials' PWB and resilience are enhanced by mindfulness training. The study's findings suggest that, in times of high uncertainty, mindfulness-based intervention programs should be expanded to include all young people. This study offers empirical support for the effectiveness of mindfulness-based interventions in raising PWB and resilience.

Sentiment and uncertainty

Sentiment should exhibit its strongest effects on asset prices at times when valuations are most subjective. Accordingly, we show that a one-standard-deviation increase in aggregate uncertainty amplifies the predictive ability of sentiment for market returns by two to four times relative to when uncertainty is at its mean. For the cross-section of returns, the predictive ability of sentiment for assets expected to be most sensitive to sentiment, including existing measures of both risk and mispricing, is substantially larger in times of higher uncertainty. The results hold for both daily and monthly proxies for sentiment and for various proxies for uncertainty.

The Real Response to Uncertainty Shocks: The Risk Premium Channel

Uncertainty shocks are also risk premium shocks. With countercyclical risk aversion (RA), a positive shock to uncertainty increases risk and elevates RA as consumption growth falls. The combination of high RA and high uncertainty produces significant equity risk premia in bad times, which in turn, exacerbate the decline of macroeconomic aggregates and equity prices. Moreover, in the cross-section of equity returns, investors demand a risk premium for stocks that perform poorly in times of high uncertainty and elevated risk aversion. In a model with endogenously time-varying RA, uncertainty shocks lead to large falls in investment and equity prices that closely match state-dependent data responses. This paper was accepted by Tomasz Piskorski, finance. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.4335 .

Uncertainty and Banks’ Security Holdings

The paper enriches the existing literature on financial intermediaries’ operations in the face of uncertainty by empirically examining the impact of banking uncertainty on banks’ security holdings. Using bank-level data in Vietnam during 2007–2019 to compute a micro uncertainty proxy based on the dispersion of bank shocks, we document that banking uncertainty tends to enhance total security holdings at banks. Decomposing aggregate securities into disaggregate components, we find that safer investments (including government bonds and financial institution bonds) dominate the overall impact of banking uncertainty on security holdings, which completely offset a drop in the volume of riskier investments (including corporate bonds and stocks) in times of higher uncertainty. Furthermore, our analysis reveals that the impact of banking uncertainty on all security holdings is stronger at riskier banks, thereby implying that bank behavior is likely attributable to the precautionary motive.

Five Steps Towards Avoiding Narrative Traps in Decision-Making.

Narratives provide simple rules about how we ought to live and what our priorities ought to be. They are especially appealing in times of high uncertainty. Using the uncertainty surrounding Covid-19 as an illustration, we show how a narrative to preserve life has become dominant, and we illustrate how it has been reinforced by several behavioural biases. We argue that being able to identify and critically evaluate the impact of dominant narratives is vital to ensuring optimal decision-making. To facilitate this, we offer five recommendations—the ABCDE of decision-making—that can help to reduce the “narrative trap” in decision-making in any uncertain environment.

Is Time a Liability for International Permanence? An analysis of Uncertain Times

Considering the worldwide COVID-19 pandemic it is timely to emphasize time pressure debates in times of high uncertainty. Through an empirical research developed based on four Brazilian high-tech firms we collected the data in real time simultaneously with the evolution of pandemic. Our paper leads to the start of debates about the role of time pressure in the internationalization of firms in uncertainty times. Presents also the relationship between liability of timing and the need to seek a manageable internationalization processes over time through international permanence.

Resilience during uncertainty? Greater social connectedness during COVID-19 lockdown is associated with reduced distress and fatigue.

BackgroundSocial connections are crucial for our health and well‐being. This is especially true during times of high uncertainty and distress, such as during the COVID‐19 lockdown. This period was characterized by unprecedented physical distancing (often communicated as social distancing) measures resulting in significant changes to people’s usual social lives. Given the potential effects of this disruption on people’s well‐being, it is crucial to identify factors which are associated with negative health outcomes, and conversely, those that promote resilience during times of adversity.AimsWe examined the relationship between individuals’ levels of social connectedness during lockdown and self‐reported stress, worry, and fatigue. Method: Survey data were collected from 981 individuals in a representative sample of Austrian citizens. Data collection occurred during the last week of a six‐week nationwide lockdown due to the COVID‐19 pandemic. The final sample consisted of 902 participants. Participants were asked to complete validated questionnaires to assess levels of social connectedness as well as measures of perceived stress, worry—both general and COVID‐19 specific—and symptoms of fatigue during the previous two weeks.ResultsOur results demonstrate that greater social connectedness during the lockdown period was associated with lower levels of perceived stress, as well as general and COVID‐19‐specific worries. Furthermore, we found a negative relationship between fatigue and social connectedness, which was mediated by feelings of stress, general worries, and COVID‐19‐specific worries—respectively, indicating that individuals with smaller network sizes, who were highly distressed during the pandemic, were also likely to report feeling more fatigued.ConclusionOur findings highlight the important role that social connections play in promoting resilience by buffering against negative physical and mental health outcomes, particularly in times of adversity in times of adversity.

Sentiment and Uncertainty

Sentiment should exhibit its strongest effects on asset prices at times when valuations are most subjective. Consistent with this hypothesis, we show that a one-standard-deviation increase in aggregate uncertainty amplifies the predictive ability of sentiment for market returns by two to four times relative to when uncertainty is at its mean. We find similar evidence for the cross-section of returns; the predictive ability of sentiment for returns of test assets expected to be most sensitive to sentiment and for anomaly returns is substantially larger in times of higher uncertainty. The results hold for both daily and monthly proxies for sentiment and for various proxies for uncertainty. The evidence sheds light on one component of time-series variation in mispricing and suggests that the effects of sentiment are greatest in times of higher uncertainty.

The Pricing and Welfare Implications of Non-anonymous Trading

A key distinction between over-the-counter markets and centralized exchanges is the non-anonymity of the transactions. In this paper, we develop a model of non-anonymous trading and compare its prices, liquidity, and efficiency of asset allocations against a baseline with anonymous transactions. The non-anonymity improves the market liquidity by reducing the concerns for adverse selection. More specially, it allows the market participants to learn valuable information about their counterparties through repeated interactions and consequently enables them to form trading relationships. However, it could harm the market liquidity by increasing the dealers' bargaining power, as the dealers learn more about their clients' liquidity needs. Our theory predicts that the bid-ask spread is smaller in non-anonymous markets, and more so for bonds with low credit-ratings, and at times of high uncertainty. The non-anonymity improves the allocative efficiency for assets with high volatility, with higher degree of asymmetric information, and with less interest among liquidity traders. Using a novel dataset of U.S. corporate bond trades, we find confirming evidence that for high-yield bonds, the bid-ask spread for non-anonymous orders is 20% smaller than that for anonymous orders, while no such price improvement is observed for investment-grade bonds. By examining the waiting times and execution probabilities in our dataset, we present evidence that differentiates our channel from search-based theories.

Uncertainty, Credit and Investment: Evidence from Firm-Bank Matched Data

This paper studies how high uncertainty affects corporate bank loans, addressing the important identification issue. In times of high uncertainty, firms reduce their credit demand due to delayed investments or a deterioration in their credit worthiness, while at the same time banks are more exposed to negative shocks to their balance sheet and thereby reduce credit supply. To isolate the uncertainty effect from the credit supply effect, we employ matched bank-firm loan data covering all loans extended by all financial intermediaries to the universe of listed firms in Korea, a bank-centered economy. Our empirical results reveal that a failure to control for credit supply leads to overestimation of the negative effect of uncertainty on bank loans. In addition, we find that the negative effect is stronger for relatively larger firms or financially unconstrained firms with low leverage or financial slack, once credit supply is controlled for. We confirm the same results in the analysis of firm investment, suggesting that high uncertainty may transmit to investment and bank loans mainly through the real options effects.

Market uncertainty and the importance of media coverage at earnings announcements

We investigate whether increased investor demand for financial information arising from higher market uncertainty leads to greater media coverage of earnings announcements. We also investigate whether greater coverage during times of higher uncertainty further destabilizes financial markets because of greater attention-based trading or, alternatively, improves trading and pricing by lowering investor acquisition and interpretation costs. When uncertainty is higher, we find evidence of greater media coverage of earnings announcements and that the greater coverage leads to improvements in investor informedness, information asymmetry, and intraperiod price timeliness, and greater trade by both retail and institutional investors. In contrast to the media serving an expanded role in improving capital markets during more uncertain times, we fail to find that changes in firm-initiated disclosures lead to similar improvements and find that less frequent analyst forecast revisions exacerbate problems in capital markets during earnings announcements.

Economic policy uncertainty: A literature review

The significance of uncertainty in policies related to economic decisions is higher than ever before in today’s interconnected world. This study contributes to existing research by reviewing the literature on the impact of economic policy uncertainty on corporations and economies worldwide. We show the importance of measuring and tracking uncertainty by highlighting its influence on financial decisions. We examine the growing number of studies that use the economic policy uncertainty index (EPU) of Baker, Bloom, and Davis (2016) as a key factor in measuring uncertainty. We then review the impact of EPU on financial markets, macro and micro level, stock markets, corporate behavior, and risk management. Then, we document the asymmetric policy responses of economic uncertainty. Overall, policy uncertainty has a significant impact on firm financial policies as well as on consumer spending. Specifically, corporations act more conservatively during times of high uncertainty, thereby slowing investments in production and employment. In addition to the local effect of EPU, it spills over to other countries.