Financial market´s appetite for risk: and the challenge of assessing its evolution by risk appetite indicators
AbstractAssessments of investors' risk appetite/aversion stance via indicators often yields results which seem unsatisfactory (see e.g. Illing and Aaron (2005)). Understanding how such indicators work therefore seems essential for further improvements. The present paper seeks to contribute to this evolution, focusing on the Global Risk Appetite Index (GRAI) class of indicators going back to Kumar and Persaud (2002). Looking at international stock indices during the subprime crisis in 2007, the plausibility of the GRAIs benefits from applying the rank correlation approach of Kumar and Persaud (2002) combined with a modified version of the factor-transformation extension proposed by Misina (2006). --
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Bibliographic InfoPaper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 2: Banking and Financial Studies with number 2009,08.
Date of creation: 2009
Date of revision:
Risk appetite indicators; risk aversion indicators; asset pricing; financial markets.;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-05 (All new papers)
- NEP-FMK-2009-09-05 (Financial Markets)
- NEP-UPT-2009-09-05 (Utility Models & Prospect Theory)
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