Advanced Search
MyIDEAS: Login to save this article or follow this journal

What does the risk-appetite index measure?

Contents:

Author Info

  • Miroslav Misina

    ()
    (Bank of Canada)

Abstract

Explanations of changes in asset prices as being due to exogenous changes in risk appetite assume that changes in asset prices due to changes in risk aversion can be uniquely identified, and that some quantitative measure can capture these in isolation. One such measure, the risk-appetite index, is based on the rank correlation between assets' riskiness and excess returns. The author seeks to provide a theoretical foundation for this measure. The arguments behind the index are given in two propositions and these are derived within a class of well-specified asset-pricing models. His results indicate that, whereas the exclusive attribution of the rank effect to changes in risk aversion is problematic in general, a specific set of circumstances can be identified in which this attribution is permissible. The key assumption is identified, and its empirical implications are examined.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.accessecon.com/pubs/EB/2003/Volume28/EB-03AA0006A.pdf
Download Restriction: no

Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 28 (2003)
Issue (Month): 6 ()
Pages: A6

as in new window
Handle: RePEc:ebl:ecbull:eb-03aa0006

Contact details of provider:

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Jean-Pierre Danthine & John B. Donaldson & Christos Giannikos & Hany Guirguis, 2004. "On the Consequences of State Dependent Preferences for the Pricing of Financial Assets," FAME Research Paper Series rp73, International Center for Financial Asset Management and Engineering.
  2. Miroslav Misina, 2003. "Are Distorted Beliefs Too Good to be True?," Working Papers 03-4, Bank of Canada.
  3. Kumar, Manmohan S & Persaud, Avinash, 2002. "Pure Contagion and Investors' Shifting Risk Appetite: Analytical Issues and Empirical Evidence," International Finance, Wiley Blackwell, vol. 5(3), pages 401-36, Winter.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Prasanna Gai & Nicholas Vause, 2005. "Measuring investors' risk appetite," Bank of England working papers 283, Bank of England.
  2. Manolescu, Gheorghe, 2011. "Appetite For Risk Of The Bank (I)," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 15(2), pages 209-223.
  3. Coudert, Virginie & Gex, Mathieu, 2008. "Does risk aversion drive financial crises? Testing the predictive power of empirical indicators," Journal of Empirical Finance, Elsevier, vol. 15(2), pages 167-184, March.
  4. Forbes, Kristin J. & Warnock, Francis E., 2012. "Capital flow waves: Surges, stops, flight, and retrenchment," Journal of International Economics, Elsevier, vol. 88(2), pages 235-251.
  5. Claudio E. V. Borio, 2004. "Market distress and vanishing liquidity: anatomy and policy options," BIS Working Papers 158, Bank for International Settlements.
  6. Kristin J. Forbes & Francis E. Warnock, 2012. "Debt- and Equity-Led Capital Flow Episodes," NBER Working Papers 18329, National Bureau of Economic Research, Inc.
  7. Marcello Pericoli & Massimo Sbracia, 2006. "The CAPM and the risk appetite index; theoretical differences and empirical similarities," Temi di discussione (Economic working papers) 586, Bank of Italy, Economic Research and International Relations Area.
  8. Miroslav Misina, 2006. "Benchmark Index of Risk Appetite," Working Papers 06-16, Bank of Canada.
  9. Kristin J. Forbes & Francis E. Warnock, 2012. "Capital Debt -and Equity-Led Capital Flow Episodes," Working Papers Central Bank of Chile 676, Central Bank of Chile.
  10. Birgit Uhlenbrock, 2009. "Financial markets' appetite for risk - and the challenge of assessing its evolution by risk appetite indicators," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Proceedings of the IFC Conference on "Measuring financial innovation and its impact", Basel, 26-27 August 2008, volume 31, pages 221-259 Bank for International Settlements.
  11. Marc Boissaux & Jang Schiltz, 2010. "An Optimal Control Approach to Portfolio Optimisation with Conditioning Information," LSF Research Working Paper Series 10-09, Luxembourg School of Finance, University of Luxembourg.
  12. Riccardo Rebonato, 2006. "Forward-Rate Volatilities And The Swaption Matrix: Why Neither Time-Homogeneity Nor Time-Dependence Are Enough," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 9(05), pages 705-746.
  13. Brenda González-Hermosillo & Vance Martin & Mardi Dungey & Renee Fry, 2003. "Characterizing Global Investors' Risk Appetite for Emerging Market Debt During Financial Crises," IMF Working Papers 03/251, International Monetary Fund.

Lists

This item is featured on the following reading lists or Wikipedia pages:
  1. Avinash Persaud in Wikipedia English ne '')

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-03aa0006. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.