American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Identifying Preference for Early Resolution from Asset Prices
American Economic Review
(pp. 2242–81)
Abstract
This paper develops an asset market-based test for preference for the timing of resolution of uncertainty. Our main theorem provides a characterization of preference for early resolution of uncertainty in terms of the risk premium realized during the period when the informativeness of macroeconomic announcements is resolved. Empirically, we find support for preference for early resolution of uncertainty based on evidence on the dynamics of the implied volatility of S&P 500 index options before Federal Open Market Committee announcements.Citation
Ai, Hengjie, Ravi Bansal, Hongye Guo, and Amir Yaron. 2026. "Identifying Preference for Early Resolution from Asset Prices." American Economic Review 116 (6): 2242–81. DOI: 10.1257/aer.20221351Additional Materials
JEL Classification
- D81 Criteria for Decision-Making under Risk and Uncertainty
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- G13 Contingent Pricing; Futures Pricing; option pricing
- G14 Information and Market Efficiency; Event Studies; Insider Trading
- G41 Behavioral Finance: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets [Neurofinance]