A Socioeconomic Well-Being Index

A. Alexandre Trindade, Abootaleb Shirvani and Xiaohan Ma ()

Papers from arXiv.org

Abstract: An annual well-being index constructed from thirteen socioeconomic factors is proposed in order to dynamically measure the mood of the US citizenry. Econometric models are fitted to the log-returns of the index in order to quantify its tail risk and perform option pricing and risk budgeting. By providing a statistically sound assessment of socioeconomic content, the index is consistent with rational finance theory, enabling the construction and valuation of insurance-type financial instruments to serve as contracts written against it. Endogenously, the VXO volatility measure of the stock market appears to be the greatest contributor to tail risk. Exogenously, "stress-testing" the index against the politically important factors of trade imbalance and legal immigration, quantify the systemic risk. For probability levels in the range of 5% to 10%, values of trade below these thresholds are associated with larger downward movements of the index than for immigration at the same level. The main intent of the index is to provide early-warning for negative changes in the mood of citizens, thus alerting policy makers and private agents to potential future market downturns.

Date: 2020-01
New Economics Papers: this item is included in nep-hap
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in Applied Economics and Finance, Vol. 7, No. 4; July 2020

Downloads: (external link)
http://arxiv.org/pdf/2001.01036 Latest version (application/pdf)

Related works:
Journal Article: A Socioeconomic Well-Being Index (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2001.01036

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().