arbiter
JournalsAccount

Risk appetite and (mis)pricing

Jiaqi Guo et al.

Journal of Banking & Finance2026https://doi.org/10.1016/j.jbankfin.2026.107657article
AJG 3ABDC A*
Weight
0.50

Abstract

This paper reexamines the beta-return relation through the lens of time-varying risk aversion. We show that the security market line (SML) depends critically on the level of aggregate risk aversion. During periods of high risk aversion, the SML exhibits a positive slope and an intercept that is statistically indistinguishable from zero, with investor sentiment playing only a minor role. During periods of low risk aversion, the SML slope becomes negative and the intercept is significantly positive. Investor sentiment affects the SML only when risk aversion is low. These patterns are robust across alternative portfolio constructions, longer investment horizons, and multiple measures of risk aversion.

Open via your library →

Cite this paper

https://doi.org/https://doi.org/10.1016/j.jbankfin.2026.107657

Or copy a formatted citation

@article{jiaqi2026,
  title        = {{Risk appetite and (mis)pricing}},
  author       = {Jiaqi Guo et al.},
  journal      = {Journal of Banking & Finance},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1016/j.jbankfin.2026.107657},
}

Paste directly into BibTeX, Zotero, or your reference manager.

Flag this paper

Risk appetite and (mis)pricing

Flags are reviewed by the Arbiter methodology team within 5 business days.

Evidence weight

0.50

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

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
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.