Investors' attitude towards risk: what can we learn from options?

摘要: Market commentators often cite changes in investors’ attitude towards risk as a possible explanation for swings asset prices. Indeed, episodes of financial turmoil coincide with anecdotal evidence abrupt shifts market sentiment from tolerance to avoidance. While these may be potentially driven by the fundamental disposition individual investors risk, they are more likely reflect effective manifested through behaviour currently active investors. In particular, similar that induced preferences over and return can also composition players or tactical trading patterns, interaction prevailing conditions institutional features. Tools track dynamics willingness take risks lead better understanding functioning markets. contribute not only management point view institutions, but improved monitoring policymakers. This article constructs an indicator aversion risk. The is obtained comparing statistical likelihood future returns, which estimated on basis historical patterns spot prices, assessment same filtered participants’ preferences, derived option we argue relative size downside assessed preference-weighted vantage points, co-moves participants Remarkably, find indicators different equity markets have significant common component, indicating investor transcends national boundaries. next two sections first describe motivate methodology then discuss time displayed three indices. last section analyse conditional whether signals high low observed consistent accounts suggesting periods retrenchment risk-taking characterised higher price volatility subdued co-movement between bond