Investor sentiment and risk appetite of real estate security market

Chi Man Hui, Xian Zheng, Hui Wang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

9 Citations (Scopus)

Abstract

This article proposes a new model to measure the risk appetite in absence of option prices. Without options transaction, traditional measurements cannot be made. This article establishes a Risk Appetite (RA) indicator by way of change measure and simulation, with two density functions, i.e. risk-neutral density and historical density. The RA indicators use the data from the Property Composite Index (PCI) and the Shanghai Stock Exchange Composite Index (SSECI). The empirical result shows that investors involved in the real estate security market have lower RA compared to those in the general security market. Particularly, RA indicators for both indices started to fall markedly in early 2008 and even more so after September 2008. The changes in RA suggest that the overall investors' attitudes nowadays towards China's stock market are never as pessimistic as before.
Original languageEnglish
Pages (from-to)2801-2807
Number of pages7
JournalApplied Economics
Volume45
Issue number19
DOIs
Publication statusPublished - 1 Jul 2013

Keywords

  • change measure
  • GARCH
  • Girsanov's theorem
  • risk appetite
  • securities

ASJC Scopus subject areas

  • Economics and Econometrics

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