Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    A Measure of Risk Appetite for the Macroeconomy
    18 Jun 2018Working Paper Summaries

    A Measure of Risk Appetite for the Macroeconomy

    by Carolin E. Pflueger, Emil Siriwardane, and Adi Sunderam
    This paper sheds new light on connections between financial markets and the macroeconomy. It shows that investors’ appetite for risk—revealed by common movements in the pricing of volatile securities—helps determine economic outcomes and real interest rates.
    LinkedIn
    Email

    Author Abstract

    We document a strong and robust positive relationship between real rates and the contemporaneous valuation of volatile stocks, which we contend measures the economy’s risk appetite. Our novel proxy for risk appetite explains 41% of the variation in the one-year real rate since 1970, while the valuation of the aggregate stock market explains just 1%. In addition, the real rate forecasts returns on volatile stocks, confirming our interpretation that changes in risk appetite drive the real rate. Increases in our measure of risk appetite are followed by a boom in investment and output.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: April 2018
    • HBS Working Paper Number: NBER Working Paper Series, No. 24529
    • Faculty Unit(s): Finance
      Trending
        • 13 Jun 2022
        • Research & Ideas

        Extroverts, Your Colleagues Wish You Would Just Shut Up and Listen

        • 11 Apr 2014
        • Working Paper Summaries

        Learning By Thinking: How Reflection Improves Performance

        • 18 Apr 2022
        • HBS Case

        Dick’s Sporting Goods Followed Its Conscience on Guns—and It Paid Off

        • 23 Jun 2022
        • Research & Ideas

        All Those Zoom Meetings May Boost Connection and Curb Loneliness

        • 28 Jun 2022
        • Book

        The Moral Enterprise: How Two Companies Profit with Purpose

    Emil N. Siriwardane
    Emil N. Siriwardane
    Finnegan Family Associate Professor of Business Administration
    Contact
    Send an email
    → More Articles
    Adi Sunderam
    Adi Sunderam
    Willard Prescott Smith Professor of Corporate Finance
    Contact
    Send an email
    → More Articles
    Find Related Articles
    • Financial Markets
    • Risk and Uncertainty
    • Risk Management

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College