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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Volume (Year): 5 (2002) Issue (Month): 3 (Winter) Pages: 401-36 Download reference. The following formats are available: HTML
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