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individual financial risk taste changes over time with the background macroeconomic and financial conditions, as well as personal … and subjective exposure to portfolio risk. Considering six different self-assessed facets, we find that risk appetite is … higher during periods of economic growth and lower during periods of recession. Risk taste is however unrelated to time when …
Persistent link: https://www.econbiz.de/10013034711
In this paper I investigate the relation between macroeconomic risk and higher-moment risk premia. I use existing … methodology for kurtosis swaps. The expected excess returns on such swaps are interpreted as higher-moment risk premia. I find … evidence supporting an increase in tail risk when variance is low and expectations about economic growth are positive. In such …
Persistent link: https://www.econbiz.de/10012847444
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This paper describes an equilibrium macro finance model where contracts are the mechanism by which differentially risk …-investment decisions generating operating income and operating risk) and (financial decisions generating financial risk); and 2 no … constrained managers of the representative firm make production-investment decisions that conform to the risk aversion of …
Persistent link: https://www.econbiz.de/10012986542
This paper describes a parsimonious macro-finance model where contracts are the mechanism by which differentially risk … in risk aversion or perception of risk changes the market valuations of their securities and has the representative firm … adjustment is designed to offset any risk shifting effects on the market valuation of bonds. The model set-up includes 2 …
Persistent link: https://www.econbiz.de/10012888831
Recent work in international finance suggests that the forward premium puzzle can be accounted for if (1) aggregate uncertainty is time-varying, and (2) countries have heterogeneous exposures to a world aggregate shock. We embed these features in a standard two-country real business cycle...
Persistent link: https://www.econbiz.de/10013121723
Most macroeconomic models fail to replicate the level, volatility, and countercyclicality of risk premia which has been …-varying risk of economic disaster. Both asset prices and macroeconomic aggregates respond to this time-varying risk. The model is … prices. An increase in the risk of disaster leads to a collapse of investment and a recession, with no current or future …
Persistent link: https://www.econbiz.de/10013146622
shocks to aggregate uncertainty, I introduce a small, time-varying risk of economic disaster in a standard real business … risk of disaster does not affect the path of macroeconomic aggregates - a "separation theorem" between macroeconomic … variation in risk premia over time, are observationally equivalent to preference shocks. An increase in the perceived …
Persistent link: https://www.econbiz.de/10013150731