|By PR Newswire||
|December 26, 2012 06:38 PM EST||
SEATTLE, Dec. 26, 2012 /PRNewswire-USNewswire/ -- According to a new study from the University of Washington Foster School of Business, excessive debate and/or ambiguity on national tax, spending, regulation and debt decisions creates an environment of uncertainty that has an ill effect on financial markets. And this malaise can outlast the uncertainty itself.
The study by Jonathan Brogaard, assistant professor of finance, and Andrew Detzel, a doctoral student at the Foster School, demonstrates that when economic policy uncertainty increases, asset prices fall concurrently, and market volatility jumps significantly. What's more, the negative effect of government-induced uncertainty persists.
"We're finding," says Brogaard, "that the lack of a decision can be just as bad as a bad decision."
Many academic studies have sought to pinpoint the economic toll of policy uncertainty. Brogaard and Detzel are the first to connect a high-frequency measure with its effect on that most telling gauge of the economy, the financial markets.
They might have zeroed in on particularly contentious moments in recent policy history: Iraq war funding, Sarbanes-Oxley and Dodd-Frank reforms, the Affordable Care Act, the debt ceiling crisis, the sunsetting of Bush-era tax credits.
Instead, they measured uncertainty itself. Brogaard and Detzel built a web crawler that captures media mentions of terms commonly associated with economic policy uncertainty. The crawler scanned millions of articles in prominent magazines and newspapers over a 20-year period, monitoring the frequency of policy uncertainty reported in 21 geographically dispersed nations, among them the United States.
Separating policy uncertainty from trigger events affords a clearer picture of the life cycle of economic policy uncertainty. It allows for continuous tracking that takes into account periods of policy debate, inaction, inclusive action, ineffectual action, and anxiety over the need for future action.
"The passing of a bill does not necessarily indicate the resolution of all uncertainty," Brogaard says.
Once they identified periods of heightened uncertainty about economic policy, Brogaard and Detzel analyzed the corresponding stock market returns representing each nation in the study. An uptick in uncertainty sinks asset prices across the economy.
The reason, Brogaard explains, is that nationwide uncertainty signals a decrease in future cash flows and an increase in the risk premium—the amount an investor demands to hold an asset. On average, the cash flow impact lasts six months and the risk premium is heightened for over a year. The overall negative effect can last long beyond the period of uncertainty caused by any specific policy event.
The study's message to policy makers is clear: be more decisive.
This is certainly a tall order in a democracy, especially a democracy as starkly polarized as the American variety. Brogaard says that the United States is about average in its amount of government indecision among the 21 nations in the study. But with federal, state and local government expenditures comprising more than 42 percent of the nation's GDP in 2009, "the ubiquity of US government policy makes it very hard to diversify against uncertainty," Brogaard adds.
And uncertainty is growing. While marking its frequency across 20 years of media reports, Brogaard and Detzel charted a recent rise in American economic policy uncertainty over the past five years, and a spike since 2008.
Something to consider as the nation hurtles toward a "fiscal cliff" of automatic tax hikes and spending cuts set to begin in 2013 unless Congress takes action. Decisive action would be best.
The full study is available for download at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2075375
SOURCE The University of Washington's Michael G. Foster School of Business
Financial Technology has become a topic of intense interest throughout the cloud developer and enterprise IT communities. Accordingly, attendees at the upcoming 20th Cloud Expo at the Javits Center in New York, June 6-8, 2017, will find fresh new content in a new track called FinTech.
Apr. 23, 2017 11:30 PM EDT Reads: 2,133
SYS-CON Events announced today that Interoute, owner-operator of one of Europe's largest networks and a global cloud services platform, has been named “Bronze Sponsor” of SYS-CON's 20th Cloud Expo, which will take place on June 6-8, 2017 at the Javits Center in New York, New York. Interoute is the owner-operator of one of Europe's largest networks and a global cloud services platform which encompasses 12 data centers, 14 virtual data centers and 31 colocation centers, with connections to 195 add...
Apr. 23, 2017 11:00 PM EDT Reads: 1,568
@DevOpsSummit at Cloud taking place June 6-8, 2017, at Javits Center, New York City, is co-located with the 20th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long developm...
Apr. 23, 2017 10:30 PM EDT Reads: 1,930
Developers want to create better apps faster. Static clouds are giving way to scalable systems, with dynamic resource allocation and application monitoring. You won't hear that chant from users on any picket line, but helping developers to create better apps faster is the mission of Lee Atchison, principal cloud architect and advocate at New Relic Inc., based in San Francisco. His singular job is to understand and drive the industry in the areas of cloud architecture, microservices, scalability ...
Apr. 23, 2017 10:00 PM EDT Reads: 3,200
Multiple data types are pouring into IoT deployments. Data is coming in small packages as well as enormous files and data streams of many sizes. Widespread use of mobile devices adds to the total. In this power panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists will look at the tools and environments that are being put to use in IoT deployments, as well as the team skills a modern enterprise IT shop needs to keep things running, get a handle on all this data, and deli...
Apr. 23, 2017 09:45 PM EDT Reads: 1,928
The age of Digital Disruption is evolving into the next era – Digital Cohesion, an age in which applications securely self-assemble and deliver predictive services that continuously adapt to user behavior. Information from devices, sensors and applications around us will drive services seamlessly across mobile and fixed devices/infrastructure. This evolution is happening now in software defined services and secure networking. Four key drivers – Performance, Economics, Interoperability and Trust ...
Apr. 23, 2017 09:30 PM EDT Reads: 3,531
In recent years, containers have taken the world by storm. Companies of all sizes and industries have realized the massive benefits of containers, such as unprecedented mobility, higher hardware utilization, and increased flexibility and agility; however, many containers today are non-persistent. Containers without persistence miss out on many benefits, and in many cases simply pass the responsibility of persistence onto other infrastructure, adding additional complexity.
Apr. 23, 2017 08:45 PM EDT Reads: 1,994
Bert Loomis was a visionary. This general session will highlight how Bert Loomis and people like him inspire us to build great things with small inventions. In their general session at 19th Cloud Expo, Harold Hannon, Architect at IBM Bluemix, and Michael O'Neill, Strategic Business Development at Nvidia, discussed the accelerating pace of AI development and how IBM Cloud and NVIDIA are partnering to bring AI capabilities to "every day," on-demand. They also reviewed two "free infrastructure" pr...
Apr. 23, 2017 08:45 PM EDT Reads: 677
Cloud Expo, Inc. has announced today that Aruna Ravichandran, vice president of DevOps Product and Solutions Marketing at CA Technologies, has been named co-conference chair of DevOps at Cloud Expo 2017. The @DevOpsSummit at Cloud Expo New York will take place on June 6-8, 2017, at the Javits Center in New York City, New York, and @DevOpsSummit at Cloud Expo Silicon Valley will take place Oct. 31-Nov. 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
Apr. 23, 2017 06:45 PM EDT Reads: 2,302
The explosion of new web/cloud/IoT-based applications and the data they generate are transforming our world right before our eyes. In this rush to adopt these new technologies, organizations are often ignoring fundamental questions concerning who owns the data and failing to ask for permission to conduct invasive surveillance of their customers. Organizations that are not transparent about how their systems gather data telemetry without offering shared data ownership risk product rejection, regu...
Apr. 23, 2017 05:30 PM EDT Reads: 939
Most companies are adopting or evaluating container technology - Docker in particular - to speed up application deployment, drive down cost, ease management and make application delivery more flexible overall. As with most new architectures, this dream takes a lot of work to become a reality. Even when you do get your application componentized enough and packaged properly, there are still challenges for DevOps teams to making the shift to continuous delivery and achieving that reduction in cost ...
Apr. 23, 2017 05:30 PM EDT Reads: 3,602
Translating agile methodology into real-world best practices within the modern software factory has driven widespread DevOps adoption, yet much work remains to expand workflows and tooling across the enterprise. As models evolve from pockets of experimentation into wholescale organizational reinvention, practitioners find themselves challenged to incorporate the culture and architecture necessary to support DevOps at scale. In his session at @DevOpsSummit at 20th Cloud Expo, Anand Akela, Senior...
Apr. 23, 2017 05:15 PM EDT Reads: 1,508
In his keynote at 19th Cloud Expo, Sheng Liang, co-founder and CEO of Rancher Labs, discussed the technological advances and new business opportunities created by the rapid adoption of containers. With the success of Amazon Web Services (AWS) and various open source technologies used to build private clouds, cloud computing has become an essential component of IT strategy. However, users continue to face challenges in implementing clouds, as older technologies evolve and newer ones like Docker c...
Apr. 23, 2017 03:30 PM EDT Reads: 2,444
SYS-CON Events announced today that Twistlock, the leading provider of cloud container security solutions, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Twistlock is the industry's first enterprise security suite for container security. Twistlock's technology addresses risks on the host and within the application of the container, enabling enterprises to consistently enforce security policies, monitor...
Apr. 23, 2017 03:30 PM EDT Reads: 3,286
The Internet of Things is clearly many things: data collection and analytics, wearables, Smart Grids and Smart Cities, the Industrial Internet, and more. Cool platforms like Arduino, Raspberry Pi, Intel's Galileo and Edison, and a diverse world of sensors are making the IoT a great toy box for developers in all these areas. In this Power Panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists discussed what things are the most important, which will have the most profound e...
Apr. 23, 2017 03:30 PM EDT Reads: 1,943