Market Volatility As a Financial Soundness Indicator; An Application to Israel
| Autor: | Liliana B Schumacher, Armando Méndez Morales |
|---|---|
| Rok vydání: | 2003 |
| Předmět: |
Finance
business.industry Inflation targeting media_common.quotation_subject Israel Volatility Risk Indicator Portfolio exchange rate equations correlations covariance equation Financial Markets and the Macroeconomy Interest rate Rate of return on a portfolio Identification (information) Exchange rate Market risk Economics General Earth and Planetary Sciences Portfolio Volatility (finance) business General Environmental Science media_common |
| Popis: | Financial decisions of economic agents are based on volatility considerations. However, no aggregate indicators have been used by policymakers and regulators to assess the market risk environment. This paper applies a market volatility indicator to analyze the Israeli's transition toward inflation targeting. Unlike conventional measures of volatility, it shows a substantial decline once volatility is measured against the minimum variance for the same returns on assets. Using a conventional Multivariate GARCH model, we find that interest rates sensitivity to changes in the risk environment may be important for a correct identification of volatility patterns of individual assets. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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