A measure of the propensity to gamble in casinos constructed without any asset price data provides relevant information for asset pricing. This measure of risk appetite improves the fit of conditional asset pricing models such as the conditional CAPM, explains cross-sectional differences in future returns for portfolios sorted on various characteristics, and helps forecast market and portfolio excess returns. The relationship between risk appetite and asset prices appears to be mainly explained by simultaneous changes in risk and risk premia

Texto para discussão no. 664

2018

Carlos Viana de Carvalho, Ruy Monteiro Ribeiro, Eduardo Zilberman, Daniel Cordeiro.

Gambling, Risk Appetite and Asset Pricing