• Media type: E-Book
  • Title: The Time Variation in Risk Appetite and Uncertainty
  • Contributor: Bekaert, Geert [Author]; Engstrom, Eric C. [Other]; Xu, Nancy R. [Other]
  • Corporation: National Bureau of Economic Research
  • Published: Cambridge, Mass: National Bureau of Economic Research, 2019
  • Published in: NBER working paper series ; no. w25673
  • Extent: 1 Online-Ressource; illustrations (black and white)
  • Language: English
  • DOI: 10.3386/w25673
  • Identifier:
  • Reproduction note: Hardcopy version available to institutional subscribers
  • Origination:
  • Footnote: System requirements: Adobe [Acrobat] Reader required for PDF files
    Mode of access: World Wide Web
  • Description: We develop measures of time-varying risk aversion and economic uncertainty that are calculated from financial variables at high frequencies. We formulate a dynamic no-arbitrage asset pricing model for equities and corporate bonds. The joint dynamics among asset-specific cash flows, macroeconomic fundamentals and risk aversion feature heteroskedasticity and non-Gaussianity. Variance risk premiums on equity are very informative about risk aversion, whereas credit spreads and corporate bond volatility are highly correlated with economic uncertainty. Model-implied risk premiums outperform standard instruments for predicting excess returns on equity and corporate bonds. A financial proxy to our economic uncertainty predicts output growth significantly negatively
  • Access State: Open Access