scholarly journals Risk Appetite and Jumps in Realized Correlation

Mathematics ◽  
2020 ◽  
Vol 8 (12) ◽  
pp. 2255
Author(s):  
Riza Demirer ◽  
Konstantinos Gkillas ◽  
Christos Kountzakis ◽  
Amaryllis Mavragani
Keyword(s):  
Risk Aversion ◽  
Financial Markets ◽  
Cash Flow ◽  
Predictive Power ◽  
Investor Sentiment ◽  
Time Varying ◽  
Risk Appetite ◽  
Diversification Strategies ◽  
Intraday Data

This paper examines the role of non-cash flow factors over correlation jumps in financial markets. Utilizing time-varying risk aversion measure as a proxy for investor sentiment and the cross-quantilogram method applied to intraday data, we show that risk aversion captures significant predictive power over realized stock-bond correlation jumps at different quantiles and lags. The predictive relation between correlation jumps and time-varying risk aversion is found to be asymmetric, as we detect a heterogeneous dependence pattern across different quantiles and lag orders. Our findings underline the importance of non-cash flow factors over correlation jumps, highlighting the role of behavioral factors in optimal portfolio allocations and the effectiveness of diversification strategies.

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.

Risk-taking and risk aversion in the period of before and after the 2008 crisis: evaluation with bibliometric analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Selim Aren ◽  
Hatice Nayman Hamamci
Keyword(s):  
Risk Aversion ◽  
Bibliometric Analysis ◽  
Risk Taking ◽  
Financial Risk ◽  
Investor Sentiment ◽  
The Other ◽  
Content Type ◽  
Risk Appetite ◽  
Java Program ◽  
Before And After

PurposeThis study aims to quantitatively classify the articles with risk-taking and risk aversion keywords and to investigate whether there is a similar emphasis in articles as parallel to the change in risk appetite in the market in the period before the crisis (bubble period) and after the crisis.Design/methodology/approachIn this study, a bibliometric analysis of the articles in which the keywords risk-taking and risk aversion are mentioned together with the word finance in the journals scanned in the Web of Science between 2004 and 2012 was performed. In this context, 936 articles were specified. Analyses were made using the CiteSpace Java program.FindingsThe three journals with the most articles with these characteristics are Journal of Banking and Finance, Journal of Financial Economics and Strategic Management Journal. Along with these two main keywords, the other two most used keywords were “model” and “performance”. In addition, the keywords “attitude”, “corporate governance”, “choice” and “determinant” were used more in the post-crisis period. On the other hand, concepts such as investor sentiment or emotions were not amongst the 10 most frequently used keywords during the nine years. This can be considered as an indicator that risk is being modelled, but emotions are relatively neglected. As a result, the findings of this study show that academic papers do not develop in connection with the mood and excitement in the market.Originality/valueThis study is one of the first studies to examine the reflection of risk appetite in the market on academic papers on financial risk-taking and aversion and to investigate whether the situation in the market and the development in publications are related.

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 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.

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