{"content":[{"text":"the uncertainty about growth impacts of future technological advances debated by economic \n historians. In our quantiﬁed illustration, we ﬁnd that prices of uncertainty ﬂuctuate because \n investors especially fear high persistence of macroeconomic growth in bad states and fear \n low persistence in good ones. This mechanism induces an endogenous nonlinearity into the \n underlying asset valuations that we characterize. This nonlinearity compounds over time in \n ways that provide a novel explanation for how asset market ﬂuctuations reﬂect uncertainty. \n What follows are two ﬁgures that illustrate how we can depict the objects in play when \n investors make decisions while juggling multiple models that express the views they want \n to entertain. \n Suppose that investors start with a simple linear (ﬁrst-order autoregressive) model of \n growth rate dynamics but that their concerns about uncertainty induces them to explore \n other statistically similar speciﬁcations including ones that they especially fear. The linear \n relation with the negative slope captures their baseline model with so-called mean rever- \n sion in growth rates. It displays is a continual pull toward the center of the growth rate \n distribution, perturbed by random shocks. The vertical axis is the local pull towards the \n center of the distribution of macroeconomic growth (net of its long run average growth \n rate.) Think of zero as the center point; in the absence of random shocks, there is pull \n towards zero. The kinked line in red emerges when our investors consider formally many \n other possible and statistically similar speciﬁcations and when they then compute another \n one that is feared but remains statistically similar to the linear model. The ﬂatter slope \n to the left of zero reﬂect investors’ concern in bad economic times that the economy may \n be stuck with more growth sluggishness than in the original model. The steeper slope to \n the right of zero reﬂects just the opposite. The good macroeconomic growth outcomes may \n be shorter lived than in the original model speciﬁcation. The blue and green curves show \n further adjustments induced by overall concerns that all of the models listed so far are \n wrong (misspeciﬁed). The overall downward shift occurs because the investors are averse \n to all of these diﬀerent forms of uncertainty. While this discussion is heuristic, the paper \n develops these ideas including the connections to statistical perspectives in formal ways \n that are amenable to computation.","bbox":{"left":0.123529,"top":0.100316,"width":0.753061,"height":0.648902}},{"text":"2","bbox":{"left":0.495217,"top":0.895686,"width":0.009552000000000005,"height":0.015109999999999957}}],"images_bbox":[],"images_bbox_not_text_overlap":[]}