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Pure Contagion and Investors Shifting Risk Appetite: Analytical Issues and Empirical Evidence
Author:
Mr. Manmohan S. Kumar
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Mr. Avinash Persaud null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2001: Issue 134
Language:
English
Publication Date:
01 Sep 2001
DOI:
https://doi.org/10.5089/9781451855609.001
ISBN:
9781451855609
ISSN:
1018-5941
Pages:
35
Keywords:
WP; risk appetite; risk; appetite index; Risk aversion; contagion affects; financial crises; investor risk preference; excess return; risk appetite measure; Hong Kong dollar; bear risk; investor behaviour; yen return; risk-appetite measure; risk-loving return; New Zealand dollar; Mexican peso; Currencies; Systemic crises; Yield curve; Currency markets; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper discusses a "pure" form of financial contagion, unrelated to economic fundamentals - investors' shifting appetite for risk. It provides an analytical framework for identifying changes in investors' risk appetite and discusses whether it is possible to directly measure them in a way that can enable policy makers to differentiate between financial contagion and domestic fundamentals as the immediate source of a crisis. Daily measures of risk appetite are computed and their usefulness in predicting financial crises is assessed.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund