Pure Contagion and Investors Shifting Risk Appetite Analytical Issues and Empirical Evidence

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...

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Bibliographic Details
Main Author: Kumar, Manmohan
Other Authors: Persaud, Avinash
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2001
Series:IMF Working Papers
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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520 |a 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