Economics Seminar - "Swarm Uncertainty"

We develop new measures of uncertainty based on the forecast errors of a large number of analysts predicting earnings per share of individualfirms. Uncertainty shocks measured using 12-month forecast errors have a significant impact on output and other macroeconomic indicators over several years. Uncertainty shocks measured using the 1-quarter forecast errors have similar properties, suggesting the potential use of this measure as a leading indicator of the macroeconomic impact of uncertainty shocks. When we scale the measures by the current share price - so that our measures are interpretable as price-earnings forecasts - their ability to account for macroeconomic dynamics is even stronger.