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
        • 14 Mar 2023
        • In Practice

        What Does the Failure of Silicon Valley Bank Say About the State of Finance?

        • 16 Mar 2023
        • Research & Ideas

        Why Business Travel Still Matters in a Zoom World

        • 13 Mar 2023
        • Op-Ed

        How Leaders Should Leave

        • 07 Mar 2023
        • HBS Case

        ChatGPT: Did Big Tech Set Up the World for an AI Bias Disaster?

        • 25 Jan 2022
        • Research & Ideas

        More Proof That Money Can Buy Happiness (or a Life with Less Stress)

    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.
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    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