Investorsâ€™ Risk Appetite and Global Financial Market Conditions
A structural vector autoregression model is developed to analyze the dynamics of bond spreads among a sample of mature and developing countries during periods of financial stress in the last decade. The model identifies and quantifies the contribution on bond spreads from global market conditions (including funding liquidity, market liquidity, as well as credit and volatility risks), contagion effects, and idiosyncratic factors. While idiosyncratic factors explain a large amount of the changes in bond spreads over the sample, global market risk factors are fundamental driving forces during periods of stress. The relative importance of the different risk factors changes substantially depending on the crisis episode. Contagion from emerging markets becomes small or non-existent when global financial market risks explicitly are taken into account.
|Date of creation:||01 Apr 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htmEmail:
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
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.:
- Rüffer, Rasmus & Stracca, Livio, 2006.
"What is global excess liquidity, and does it matter?,"
Working Paper Series
0696, European Central Bank.
- Rasmus Ruffer & Livio Stracca, 2007. "What is global excess liquidity, and does it matter?," Money Macro and Finance (MMF) Research Group Conference 2006 120, Money Macro and Finance Research Group.
- Olivier Jean Blanchard & Danny Quah, 1988.
"The Dynamic Effects of Aggregate Demand and Supply Disturbances,"
NBER Working Papers
2737, National Bureau of Economic Research, Inc.
- Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September.
- Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
- Marcello Pericoli & Massimo Sbracia, 2003.
"A Primer on Financial Contagion,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 17(4), pages 571-608, 09.
- Nicholas Barberis & Ming Huang & Tano Santos, .
"Prospect Theory and Asset Prices,"
CRSP working papers
494, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Nicholas BARBERIS & Ming HUANG & Tano SANTOS, 2000. "Prospect Theory and Asset Prices," FAME Research Paper Series rp16, International Center for Financial Asset Management and Engineering.
- Nicholas Barberis & Ming Huang & Tano Santos, 1999. "Prospect Theory and Asset Prices," NBER Working Papers 7220, National Bureau of Economic Research, Inc.
- Dungey, Mardi & Fry, Renee & Gonzalez-Hermosillo, Brenda & Martin, Vance, 2006. "Contagion in international bond markets during the Russian and the LTCM crises," Journal of Financial Stability, Elsevier, vol. 2(1), pages 1-27, April.
- Virginie Coudert & Mathieu Gex, 2007.
"Does Risk Aversion Drive Financial Crises? Testing the Predictive Power of Empirical Indicators,"
2007-02, CEPII research center.
- 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.
- Brenda GonzÃ¡lez-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.
- Jun Liu & Francis A. Longstaff & Ravit E. Mandell, 2006.
"The Market Price of Risk in Interest Rate Swaps: The Roles of Default and Liquidity Risks,"
The Journal of Business,
University of Chicago Press, vol. 79(5), pages 2337-2360, September.
- Liu, Jun & Longstaff, Francis A. & Mandell, Ravit E., 2004. "The Market Price Of Risk In Interest Rate Swaps: The Roles Of Default And Liquidity Risks," University of California at Los Angeles, Anderson Graduate School of Management qt5z42g22g, Anderson Graduate School of Management, UCLA.
- Reinhart, Carmen & Kaminsky, Graciela, 2008.
"The center and the periphery: The globalization of financial turmoil,"
14100, University Library of Munich, Germany.
- Graciela L. Kaminsky & Carmen Reinhart, 2003. "The Center and the Periphery: The Globalization of Financial Turmoil," NBER Working Papers 9479, National Bureau of Economic Research, Inc.
- Martin, V. & Dungey & M., 2004.
"Empirical Modelling of Contagion: A Review of Methodologies,"
Econometric Society 2004 Far Eastern Meetings
574, Econometric Society.
- Mardi Dungey & Renee Fry & Brenda Gonzalez-Hermosillo & Vance Martin, 2005. "Empirical modelling of contagion: a review of methodologies," Quantitative Finance, Taylor & Francis Journals, vol. 5(1), pages 9-24.
- Mardi Dungey & Renee Fry & Vance Martin & Brenda GonzÃ¡lez-Hermosillo, 2004. "Empirical Modeling of Contagion; A Review of Methodologies," IMF Working Papers 04/78, International Monetary Fund.
- Vance L. Martin & Brenda Gonzalez-Hermosillo, & Mardi Dungey & Renee A. Fry, 2004. "Empirical Modelling of Contagion: A Review of Methodologies," Econometric Society 2004 Australasian Meetings 243, Econometric Society.
- 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.
- Laura E. Kodres & Matthew Pritsker, 2002. "A Rational Expectations Model of Financial Contagion," Journal of Finance, American Finance Association, vol. 57(2), pages 769-799, 04.
- Gai, Prasanna & Vause, Nicholas, 2005. "Measuring Investors' Risk Appetite," MPRA Paper 818, University Library of Munich, Germany.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:08/85. 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: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.