That’s the title of an article by Cascaldi-Garcia et al. (2023) within the Journal of Financial Literature. I summarize a few of the key findings under.

Definitions:

• Threat: Applies to conditions during which the
  final result is unknown to choice makers, however the chance distribution
  governing the result is thought”
• Volatility. Typically used synonymously with
  danger, volatility is a statistical measure of the variation in noticed outcomes
• Uncertainty. Characterised by each an
  unknown final result and an unknown chance distribution

Notice the important thing distinction between danger and uncertainty. Citing Caballero 2010, the article notes:

When brokers understand that their assumptions about danger are now not legitimate and circumstances of uncertainty apply, their worry about surprising losses can ravage monetary markets.

Beneath I summarize 4 other ways to measure uncertainty: (i) news-based, (ii) survey-based, (iii) asset-based, and (iv) econometric.

Information-based measures.

This strategy makes use of mentions of various kinds of danger and
newspapers and different media as a quantitative measure of uncertainty.  Examples embody financial coverage uncertainty
(EPU) index developed by Baker, Bloom,
and Davis (2016), index of financial coverage uncertainty (MPU) developed by Husted,
Rogers and Solar (2020), and a commerce insurance policies uncertainty (TPU) index
developed by Caldara
et al. (2020).  Ahir, Bloom and Furceri (2022) created
a World Uncertainty Index (WUI), which is a GDP-weighted common of
country-level uncertainty indexes.

Of specific curiosity, the Baker, Bloom and David article constructed
 “…a health-care EPU index by looking out
for articles that debate rising EPU in addition to phrases equivalent to ‘well being care,’ ‘Medicaid,’
‘Medicare,’ ‘medical insurance,’ ‘reasonably priced care act,’ and ‘medical insurance coverage
reform’.”

The strategy is helpful as it might have a look at future danger—particularly geopolitical—however is probably going biased in the direction of the notion of editorship at main media corporations. Additional, causation could also be problematic because the suggestion of extra (or much less) danger at main media entities might affect public perceptions.

Survey-based strategy.

This strategy asks people to think about a wide range of
totally different eventualities and place a chance related to every.  Then one can measure uncertainty primarily based on the
commonplace deviation of the responses within the survey. Ex-ante measures usually
ask respondents about level predictions (e.g., imply expectation) of future
occasions (e.g., inflation, GDP, gross sales progress) at a future time interval.
Aggregating particular person responses permits for the estimation of a measure of the
dispersion throughout respondents relating to the purpose prediction. This calculates
uncertainty throughout people. Different surveys additionally ask people in regards to the chance
of sure occasions occurring and thus can get inside particular person uncertainty as
nicely. Ex-post measures of uncertainty in contrast deviations of latest financial
knowledge releases from consensus expectations.

 Like all metrics of uncertainty,
these have each execs and cons.

“…survey-based measures enable precision in regards to the
sector during which the uncertainty is positioned (e.g., corporations, households, or
merchants), the financial measure (e.g., employment, expenditures, coverage), and
the horizon over which the uncertainty prevails. Nonetheless, these measures have a tendency
to be out there at a decrease frequency and therefore presumably stale relative to, say,
news-based or market-based measures.”

Econometric approaches.

Econometric approaches use knowledge estimation methods and
equate uncertainty with lack of predictability of combination exercise. One measure
of uncertainty is value-at-risk (VaR), which is outlined as a threshold such
that the chance of a selected final result not exceeding this threshold is
equal to a desired stage.  The
possibilities are sometimes computed primarily based on quantile regressions.   Extra broadly:

“In comparison with various measures of uncertainty, econometric-based measures have the benefit of being instantly grounded in—and guided by—statistical inference, and so they mirror the “huge image” in the identical sense as news-based measures. Nonetheless, econometric-based measures can be found at decrease frequencies and could also be considerably totally different when estimated on ex submit revised knowledge versus real-time knowledge”  The article cites a paper by Jurado, Ludvigson, and Ng (2015), which makes use of a factor-augmented forecasting mannequin as follows:

Asset-based measures

Historic volatility in asset returns and rates of interest is
one solution to measure. Asset-based measures are inclined to mirror the view of market
individuals actively buying and selling in a single specific asset market and thus might solely
be pricing in danger that impacts that specific asset.

“One extensively used uncertainty measure is the VIX, the Chicago
Board of Choices Change’s (CBOE) Volatility Index, an index calculated utilizing
fairness index choices and measuring market individuals’ expectations for the
volatility of the S&P 500 index over the approaching 30 days.”

The method for VIX is as follows:

One other measure is realized volatility (RV), which is outlined
because the scaled sum of squared each day returns. RV is taken into account to be an enchancment
over generalized autoregressive conditional heteroskedasticity (GARCH). As
asset primarily based measures typically have giant pattern dimension and are steadily measured,
one can readily seize increased order moments as nicely (e.g., skewness and kurtosis). 

Conclusion

The overview paper sadly doesn’t contact a lot on well being—besides as how COVID-19 impacted the worldwide financial system and the well being care EPU by Baker et al.—however nonetheless it does present a healthful overview of risk-related metrics. These empirical approaches for measuring danger utilizing numerous sources (information, surveys, econometric approaches, and asset costs)–may readily be tailored for well being care functions, specifically the information and survey-based measures.