Tag Archives: risk aversion

In his blog, John Cochrane discusses plausible features of habit models (that some other models share): Consumption moves more with income in bad times. In bad times, consumers start to pay inordinate attention to rare bad states of nature. [The habit model] also gives a natural account of endogenous time-varying attention to rare events.

Published: 17th March 2016 Download issue: Financial markets search for a second wind Equity markets in developed economies rebounded in February, after spending December and January in an attitude of crisis. We think that this is just a tactical rebound, rather than a return to the bull market that prevailed on equity markets from 2009 to 2014. The fundamentals that limit the upside for equities have not changed; meanwhile, the limits of central bank policy are becoming increasingly...

We show the two phases or two innings or phases of Swiss franc appreciation: The “risk aversion game” and the “inflation game”. With the weakening of emerging markets and the strengthening of the United States in 2013/2014, the Swiss National Bank (SNB) had won the first battle in the war against financial market, the “risk aversion game“, the first innings in a two-part match. Risk aversion is lower because the United States recovered thanks to lower oil prices.The “inflation game”...