The dynamic relationship among economic and monetary policy, geopolitical risk, sentiment, and risk aversion: A TVP-VAR approach

IF 7.4 2区经济学 Q1 BUSINESS, FINANCE

Finance Research Letters Pub Date : 2024-11-29 DOI:10.1016/j.frl.2024.106532

Sun-Yong Choi, Elroi Hadad

引用次数: 0

Abstract

We study how external economic and market uncertainty factors affect investors’ risk aversion. Utilizing TVP-VAR framework, we examine the impact of economic policy uncertainty (EPU), monetary policy uncertainty (MPU), geopolitical risk (GPR), and investor sentiment (Sent) on the risk aversion index (RAI). Our analysis reveals that (i) EPU and MPU are primary transmitters of shocks, significantly influencing RAI; (ii) GPR has a minimal and temporary effect, while Sent exhibits limited influence; and (iii) the impact on risk aversion has lessened, indicating growing market resilience to policy-related shocks. These findings underscore the psychological impact of economic instability on investors’ risk aversion.

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来源期刊

Finance Research Letters BUSINESS, FINANCE-

CiteScore

11.10

自引率

14.40%

发文量

863

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