Sinposis

This book adds to the resolution of two problems in finance and economics: i) what is macro-financial uncertainty? : How to measure it? How is it different from risk? How important is it for the financial markets? And ii) what sort of asymmetries underlie financial risk and uncertainty propagation across the global financial markets? That is, how risk and uncertainty change according to factors such as market states or market participants. In Chapter 2, which is entitled ?Momentum Uncertainties?, the relationship between macroeconomic uncertainty and the abnormal returns of a momentum trading strategy in the stock market is studies. We show that high levels of uncertainty in the economy impact negatively and significantly the returns of a portfolio of stocks that consist of buying past winners and selling past losers. Uncertainty acts as an economic regime that underlies abrupt changes over time of the returns generated by momentum strategies. In Chapter 3, ?Measuring Uncertainty in the Stock Market?, a new index for measuring stock market uncertainty on a daily basis is proposed. The index considers the inherent differentiation between uncertainty and the common variations between the series. 4: ?Uncertainty, Systemic Shocks and the Global Banking Sector: Has the Crisis Modified their Relationship?? we explore the stability of systemic risk and uncertainty propagation among financial institutions in the global economy, and show that it has remained stable over the last decade. 5, ?Currency downside risk, liquidity, and financial stability?, downside risk propagation across global currency markets and the ways in which it is related to liquidity is analyzed.