THE ROLE OF UNCERTAINTY IN THE STOCK MARKET.

 Economic theory states that uncertainty, either about the state of the economy or policies, can negatively affect the economy by delaying consumers and firms’ decisions to purchase goods or invest in new capital. In this project, you can investigate the role that uncertainty plays in the stock market. In particular, you can study the following questions: What is the effect of uncertainty on the level of stock market returns? What is the effect on the correlation between single stocks and the market? Are particularly sectors or stocks more sensitive to high degrees of uncertainty? **What separates this course from many other writing courses is that in your written work you are not simply expected to report on other papers’ findings, or survey a particular literature. Instead, you are expected to write about your own findings, obtained from some simple empirical work (usually an OLS regression) **The paper should clearly identify the research question you aim to answer, why it matters, and explain what you do to answer it (what kind of data you use, what techniques you use). Any paper should include an empirical analysis: this means that you should use the econometric techniques that you have learned in previous courses to tackle your question (usually one or more OLS regressions). You should devote a lot of effort in interpreting the results and understanding what they may depend on. **The final research paper should include an empirical analysis related to a topic of your choice. The easiest way to manage your data set and run regressions is by using EViews, a very user-friendly software package for data analysis, econometrics, and forecasting. You should get a copy of this software as soon as possible and become familiar with how to use it. You can use other software (Stata, SAS, SPSS, R, or even Excel), but EViews is much easier to use.