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Pure Contagion and Investors' Shifting Risk Appetite: Analytical Issues and Empirical Evidence

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  • Kumar, Manmohan S
  • Persaud, Avinash
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    Abstract

    This paper discusses a "pure" form of financial contagion, unrelated to economic fundamentals--investors' shifting appetite for risk. It provides an analytical framework for identifying changes in investors' risk appetite and discusses whether it is possible to directly measure them in a way that can enable policy makers to differentiate between financial contagion and domestic fundamentals as the immediate source of a crisis. Daily measures of risk appetite are computed and their usefulness in predicting financial crises is assessed. Copyright 2002 by Blackwell Publishers Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal International Finance.

    Volume (Year): 5 (2002)
    Issue (Month): 3 (Winter)
    Pages: 401-36

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    Handle: RePEc:bla:intfin:v:5:y:2002:i:3:p:401-36

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    Cited by:
    1. Victor Vaugirard, 2005. "Crony Capitalism and Sovereign Default," Open Economies Review, Springer, vol. 16(1), pages 77-99, January.
    2. David Hauner & Manmohan S. Kumar, 2005. "Financial Globalization and Fiscal Perfomance in Emerging Markets," IMF Working Papers 05/212, International Monetary Fund.
    3. Virginie Coudert & Cécile Couharde & Valérie Mignon, 2010. "Exchange Rate Flexibility across Financial Crises," CEPN Working Papers hal-00845254, HAL.
    4. Laurence Fung & Chi-sang Tam & Ip-wing Yu, 2008. "Changes in Investors' Risk Appetite - An Assessment of Financial Integration and Interdependence," Working Papers 0812, Hong Kong Monetary Authority.
    5. Leitao, Joao & Armada, Manuel Rocha & Ferreira, Joaaquim, 2012. "Corruption and Co-Movements in European Listed Sport Companies: Did Calciocaos really matter?," MPRA Paper 42474, University Library of Munich, Germany.
    6. Miroslav Misina, 2003. "What does the risk-appetite index measure?," Economics Bulletin, AccessEcon, vol. 28(6), pages A6.
    7. Wang, Lihong, 2014. "Who moves East Asian stock markets? The role of the 2007–2009 global financial crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 28(C), pages 182-203.
    8. Jarita DUASA & Salina H. KASSIM, 2009. "Herd Behavior In Malaysian Capital Market: An Empirical Analysis," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(1(7)_ Spr).
    9. Brenda González-Hermosillo, 2008. "Investors’ Risk Appetite and Global Financial Market Conditions," IMF Working Papers 08/85, International Monetary Fund.
    10. Bayoumi, Tamim & Fazio, Giorgio & Kumar, Manmohan & MacDonald, Ronald, 2007. "Fatal attraction: Using distance to measure contagion in good times as well as bad," Review of Financial Economics, Elsevier, vol. 16(3), pages 259-273.
    11. Virginie Coudert & Mathieu Gex, 2007. "Does Risk Aversion Drive Financial Crises? Testing the Predictive Power of Empirical Indicators," Working Papers 2007-02, CEPII research center.
    12. Coudert, Virginie & Gex, Mathieu, 2010. "Contagion inside the credit default swaps market: The case of the GM and Ford crisis in 2005," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(2), pages 109-134, April.
    13. Helmut Reisen & Martin Grandes & Nicolas Pinaud, 2005. "Macroeconomic Policies: New Issues of Interdependence," OECD Development Centre Working Papers 241, OECD Publishing.
    14. Miroslav Misina, 2006. "Benchmark Index of Risk Appetite," Working Papers 06-16, Bank of Canada.
    15. Bruno Bonizzi, 2013. "Capital Flows to Emerging Markets: An alternative Theoretical Framework," Working Papers 186, Department of Economics, SOAS, University of London, UK.
    16. Virginie Coudert & Cécile Couharde & Valérie Mignon, 2010. "Exchange Rate Flexibility across Financial Crises," Working Papers hal-00845254, HAL.
    17. Vaugirard, Victor, 2007. "Informational contagion of bank runs in a third-generation crisis model," Journal of International Money and Finance, Elsevier, vol. 26(3), pages 403-429, April.
    18. Brana, Sophie & Lahet, Delphine, 2010. "Determinants of capital inflows into Asia: The relevance of contagion effects as push factors," Emerging Markets Review, Elsevier, vol. 11(3), pages 273-284, September.
    19. Zaiter Lahimer, Mahjouba, 2011. "L’impact des entrées de capitaux privés sur la croissance économique dans les pays en développement," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/7670 edited by Sterdyniak, Henri.
    20. Mustafa Çağlayan & János Pintér, 2013. "Development and calibration of a currency trading strategy using global optimization," Journal of Global Optimization, Springer, vol. 56(2), pages 353-371, June.
    21. Gai, Prasanna & Vause, Nicholas, 2005. "Measuring Investors' Risk Appetite," MPRA Paper 818, University Library of Munich, Germany.

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