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Risk-on/Risk-off: Measuring Shifts in Investor Sentiment

Author

Listed:
  • Anusha Chari
  • Karlye Dilts Stedman
  • Christian T. Lundblad

Abstract

A new, high frequency measure of investor sentiment outperforms similar measures in forecasting investment activity in emerging markets.

Suggested Citation

  • Anusha Chari & Karlye Dilts Stedman & Christian T. Lundblad, 2024. "Risk-on/Risk-off: Measuring Shifts in Investor Sentiment," Research Working Paper RWP 24-12, Federal Reserve Bank of Kansas City.
    • Handle: RePEc:fip:fedkrw:99293
    DOI: 10.18651/RWP2024-12
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    References listed on IDEAS

    as
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    4. Chotibhak Jotikasthira & Christian Lundblad & Tarun Ramadorai, 2012. "Asset Fire Sales and Purchases and the International Transmission of Funding Shocks," Journal of Finance, American Finance Association, vol. 67(6), pages 2015-2050, December.
    5. Eugenio Cerutti & Stijn Claessens & Andrew K. Rose, 2019. "How Important is the Global Financial Cycle? Evidence from Capital Flows," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(1), pages 24-60, March.
    6. Bruno, Valentina & Shin, Hyun Song, 2015. "Capital flows and the risk-taking channel of monetary policy," Journal of Monetary Economics, Elsevier, vol. 71(C), pages 119-132.
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    8. Geert Bekaert & Campbell R. Harvey & Christian T. Lundblad & Stephan Siegel, 2011. "What Segments Equity Markets?," The Review of Financial Studies, Society for Financial Studies, vol. 24(12), pages 3841-3890.
    9. Boris Hofmann & Ilhyock Shim & Hyun Song Shin, 2016. "Sovereign yields and the risk-taking channel of currency appreciation," BIS Working Papers 538, Bank for International Settlements.
    10. Keim, Donald B. & Stambaugh, Robert F., 1986. "Predicting returns in the stock and bond markets," Journal of Financial Economics, Elsevier, vol. 17(2), pages 357-390, December.
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    12. Simon Gilchrist & Egon Zakrajsek, 2012. "Credit Spreads and Business Cycle Fluctuations," American Economic Review, American Economic Association, vol. 102(4), pages 1692-1720, June.
    13. Anusha Chari & Karlye Dilts Stedman & Christian Lundblad & Andrew Karolyi, 2021. "Taper Tantrums: Quantitative Easing, Its Aftermath, and Emerging Market Capital Flows [Pricing the term structure with linear regressions]," The Review of Financial Studies, Society for Financial Studies, vol. 34(3), pages 1445-1508.
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    More about this item

    Keywords

    risk-on/risk-off; global investor risk aversion; extreme events; tail risk; portfolio reallocation; return predictability;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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