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Monetary Policy, Risk Aversion and Uncertainty in an International Context

Sakshi Saini et al.

Multinational Finance Journal2020article
AJG 1ABDC B
Weight
0.38

What the paper says

This paper analyses the interaction of monetary policy (both domestic and global), risk aversion and uncertainty for a set of advanced and emerging economies in vector autoregressive (VAR) framework. Variance risk premium (VRP) is used as a measure of risk aversion and computed as the difference between the risk-neutral and the physical expectation of the return variance. VRP is positive on average for all economies and exhibits significant inter-temporal variation. Results reveal that expansionary monetary policy leads to a short-term increase in risk aversion and a decrease in uncertainty. Central banks respond by reducing the policy rate in response to risk aversion and uncertainty shocks. Both risk aversion and uncertainty exhibit a higher magnitude of response to domestic as compared to the global monetary policy shocks. Further, we find that risk aversion positively affects risk premium and thus, considerably explains variations in excess returns in the market.

1 citation

Cite this paper

@article{sakshi2020,
  title        = {{Monetary Policy, Risk Aversion and Uncertainty in an International Context}},
  author       = {Sakshi Saini et al.},
  journal      = {Multinational Finance Journal},
  year         = {2020},
}

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Monetary Policy, Risk Aversion and Uncertainty in an International Context

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Evidence weight

0.38

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.09 × 0.4 = 0.04
M · momentum0.80 × 0.15 = 0.12
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.