Time-varying risk aversion and its macroeconomic and financial determinants - A comparative analysis in the U.S. and French financial markets

Abstract

This empirical study evaluates risk aversion dynamics in the U.S. and French financial markets in a comparative setting for the period 2000–2016. Key macroeconomic and financial variables that determine the variations in the level of risk aversion in each of the financial markets are estimated to identify the most important variables on which investors focus. The analysis is made for two sub-periods (2000–2008 and 2008–2016) to assess if there has been any significant change in risk aversion dynamics around Lehman Brothers bankruptcy. Results show that there are meaningful similarities and differences among financial markets and through time periods.