Pure Contagion and Investors’ Shifting Risk Appetite: Analytical Issues and Empirical Evidence
Manmohan S. Kumar and
Avinash Persaud
International Finance, 2002, vol. 5, issue 3, 401-436
Abstract:
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.
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:bla:intfin:v:5:y:2002:i:3:p:401-436
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