Ambiguity and Time-Varying Risk Aversion in Sovereign Debt Markets

This paper introduces changes in the level of ambiguity as a complementary source of time-varying risk aversion. We show in a consumption-based asset pricing model with simultaneously risky and ambiguous assets that a rise in the level of ambiguity raises investors' risk aversion. The effect is quantified in an application to European sovereign debt markets using a structural VAR to achieve identification in the data.

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Year of publication:	2017
Authors:	Grosse Steffen, Christoph ; Podstawski, Maximilian
Publisher:	Kiel, Hamburg : ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft

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Series:	Beiträge zur Jahrestagung des Vereins für Socialpolitik 2017: Alternative Geld- und Finanzarchitekturen - Session: Applied Macroeconometrics ; A06-V2
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Conference Paper
Language:	English
Other identifiers:	hdl:10419/168101 [Handle] RePEc:zbw:vfsc17:168101 [RePEc]
Classification:	C32 - Time-Series Models ; D80 - Information and Uncertainty. General ; E43 - Determination of Interest Rates; Term Structure Interest Rates ; G01 - Financial Crises ; H63 - Debt; Debt Management
Source:	EconStor

Persistent link: https://www.econbiz.de/10011712614