scholarly journals Time-varying risk aversion and the profitability of momentum trades

2020 ◽  
Vol 9 ◽  
pp. 43-54 ◽  
Author(s):  
Riza Demirer ◽  
Shrikant Jategaonkar
Keyword(s):  
Stock Market ◽  
Risk Aversion ◽  
Predictive Power ◽  
Market Volatility ◽  
Time Varying ◽  
Momentum Strategies ◽  
Degree Of Risk ◽  
The U.S

We show that time-varying risk aversion serves as a significant predictor of stock market momentum in the U.S. and globally. Risk aversion is found to be a robust predictor of momentum returns even after controlling for various well established stock market predictors and absorbs the predictive power of market volatility. The findings imply that momentum strategies can be enhanced by conditioning trades on the degree of risk aversion in the marketplace.

scholarly journals On the hedging benefits of REITs: The role of risk aversion and market states

2021 ◽  
Vol 10 (2) ◽  
pp. 126-132
Author(s):  
Riza Demirer ◽  
Asli Yuksel ◽  
Aydin Yuksel
Keyword(s):  
Stock Market ◽  
Risk Aversion ◽  
Risk Reduction ◽  
Significant Risk ◽  
Time Varying ◽  
Hedging Strategy ◽  
Risk Return ◽  
Market Risks ◽  
The U.S

We propose a dynamic, forward-looking hedging strategy to manage stock market risks via positions in REITs, conditional on the level of risk aversion. Our findings show that REITs do not only offer significant risk reduction for passive portfolios, but also offer much improved risk-adjusted returns with the greatest benefits observed for Australia, Canada and the U.S. Overall, our findings suggest that time-varying risk aversion can be utilized to (i) establish effective hedges against stock market risks via positions in REITS, and (ii) improve the risk-return profile of passive portfolios.

scholarly journals Time-Varying Risk Aversion and the Profitability of Carry Trades: Evidence from the Cross-Quantilogram

Economies ◽  
2020 ◽  
Vol 8 (1) ◽  
pp. 18
Author(s):  
Riza Demirer ◽  
Rangan Gupta ◽  
Hossein Hassani ◽  
Xu Huang
Keyword(s):  
Risk Aversion ◽  
Predictive Power ◽  
Investor Sentiment ◽  
Time Varying ◽  
Carry Trade ◽  
Currency Markets ◽  
High Quantiles ◽  
Predictive Role ◽  
The Cross ◽  
Directional Predictability

This paper examines the predictive power of time-varying risk aversion over payoffs to the carry trade strategy via the cross-quantilogram methodology. Our analysis yields significant evidence of directional predictability from risk aversion to daily carry trade returns tracked by the Deutsche Bank G10 Currency Future Harvest Total Return Index. The predictive power of risk aversion is found to be stronger during periods of moderate to high risk aversion and largely concentrated on extreme fluctuations in carry trade returns. While large crashes in carry trade returns are associated with significant rises in investors’ risk aversion, we also found that booms in carry trade returns can be predicted at high quantiles of risk aversion. The results highlight the predictive role of extreme investor sentiment in currency markets and regime specific patterns in carry trade returns that can be captured via quantile-based predictive models.

scholarly journals A Study Of U.S. Stock Market Volatility, Fall 2008

2011 ◽  
Vol 7 (11) ◽  
Author(s):  
Ron Christner
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Life Span ◽  
Relative Magnitude ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Font Size ◽  
Bear Market ◽  
Stock Indexes ◽  
The U.S

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; color: black;"><span style="font-size: x-small;">This is a market volatility study utilizing three measures of assessing volatility in the U.S stock markets prior to and after the month of September 2008 using three proxies. The first is the VIX index, the CBOE options volatility measure. The next two are bearish, or short position strategy, ETF&rsquo;s based on stock indexes but designed to reflect and benefit from stock market movements in the downward direction. They are the Power Shares index, symbol SDS, and the Rydex Index, symbol RMS. This research evaluates and analyzes weekly movements in the three volatility variables mentioned above for a period of the last eight months of 2008. This includes the four months prior to and the four months after the beginning of September 2008. Specifically, the relative magnitude, volatility and degree of correlation between the three variables will be examined and compared to the movements in NYSE, NASDAQ and S &amp; P stock indexes. The life span and volume of trading, one measure of liquidity, in each of the three variables will also be evaluated. Part of the analysis, and conclusions, will involve analyzing how similar or dissimilar the three behave and whether one may be a better indicator of current<span style="mso-spacerun: yes;">&nbsp; </span>or future volatility in the stock market, or financial markets in general and how effective the bear market ETF&rsquo;s might be as hedging vehicles in a down market.</span></span></p>

Risk aversion and stock market volatility

1992 ◽  
Vol 14 (4) ◽  
pp. 593-606 ◽  
Author(s):  
Glenn W. Boyle ◽  
Leslie Young
Keyword(s):  
Stock Market ◽  
Risk Aversion ◽  
Market Volatility ◽  
Stock Market Volatility
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