To What Extent Can Risk Indicators Identify a Coming Financial Crisis? Evaluating Indicator Performance On Economic Downturns In The US.
(2024) NEKH02 20232Department of Economics
- Abstract
- There are several economic variables used by investors to assess the risk of financial downturns. In this paper, we test twelve variables, divided into three categories: macroeconomic-, financial risk-, and sentiment indicators, in a logistic regression model, on in-sample data, with a binary outcome to evaluate their predictive power of economic downturns in the US, including the S&P 500, US recessions and Bitcoin. This was achieved by answering the question: “To What Extent Can Risk Indicators Identify a Coming Financial Crisis?”. We found that the most effective predictions came from the San Francisco Fed News Sentiment Index, the Chicago Board of Exchange Volatility Index, and the Consumer Confidence Index. These variables showed to be... (More)
- There are several economic variables used by investors to assess the risk of financial downturns. In this paper, we test twelve variables, divided into three categories: macroeconomic-, financial risk-, and sentiment indicators, in a logistic regression model, on in-sample data, with a binary outcome to evaluate their predictive power of economic downturns in the US, including the S&P 500, US recessions and Bitcoin. This was achieved by answering the question: “To What Extent Can Risk Indicators Identify a Coming Financial Crisis?”. We found that the most effective predictions came from the San Francisco Fed News Sentiment Index, the Chicago Board of Exchange Volatility Index, and the Consumer Confidence Index. These variables showed to be good leading indicators in combination for stock market crises and recessions. The variables evaluated on Bitcoin crises had weak predictive power. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9147720
- author
- Bernhardsson, Hugo LU and Lantz, Alexander LU
- supervisor
- organization
- course
- NEKH02 20232
- year
- 2024
- type
- M2 - Bachelor Degree
- subject
- keywords
- S&P 500, Recession, Risk, Sentiment, Logit
- language
- English
- id
- 9147720
- date added to LUP
- 2024-04-16 09:26:08
- date last changed
- 2024-04-16 09:26:08
@misc{9147720, abstract = {{There are several economic variables used by investors to assess the risk of financial downturns. In this paper, we test twelve variables, divided into three categories: macroeconomic-, financial risk-, and sentiment indicators, in a logistic regression model, on in-sample data, with a binary outcome to evaluate their predictive power of economic downturns in the US, including the S&P 500, US recessions and Bitcoin. This was achieved by answering the question: “To What Extent Can Risk Indicators Identify a Coming Financial Crisis?”. We found that the most effective predictions came from the San Francisco Fed News Sentiment Index, the Chicago Board of Exchange Volatility Index, and the Consumer Confidence Index. These variables showed to be good leading indicators in combination for stock market crises and recessions. The variables evaluated on Bitcoin crises had weak predictive power.}}, author = {{Bernhardsson, Hugo and Lantz, Alexander}}, language = {{eng}}, note = {{Student Paper}}, title = {{To What Extent Can Risk Indicators Identify a Coming Financial Crisis? Evaluating Indicator Performance On Economic Downturns In The US.}}, year = {{2024}}, }