Open AccessDO BUSINESS CYCLE REGIMES MATTER IN FINANCIAL PORTFOLIO CHOICE?
Author(s) -
Nicholas Apergis
Publication year - 2018
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 4
ISSN - 1410-8046
DOI - 10.21098/bemp.v21i1.958
Subject(s) - business cycle , recession , portfolio , boom , context (archaeology) , asset (computer security) , economics , empirical evidence , finance , business , financial economics , monetary economics , macroeconomics , paleontology , philosophy , computer security , epistemology , environmental engineering , biology , computer science , engineering
This study investigates how business cycles regimes can explain financial portfolio decisions across investors and countries, given a number of idiosyncratic characteristics. In particular, the empirical strategy studies the relationship between risky asset shares and linear and nonlinear business cycles. The empirical part employs data from household surveys in the U.K., France, Germany, Japan, the Netherlands, Sweden, Norway, Denmark, Italy, Switzerland, Canada, Australia and New Zealand for the period of 1998 to 2012. The analysis provides evidence that while a linear framework does not provide a statistically significant association between business cycles and decisions in risky investments, a nonlinear business cycles context leads investors to decrease their risky investments stronger during recessions than they increase them during booms, lending support to the hypothesis of interaction between financial risks and other determinants. The results are expected to signal interesting flashing points not only to market participants and portfolio managers, but mainly to policy makers and the way their economic policy decisions affect the working of financial markets.