According to Credit Suisse, global risk appetite is on course for “panic”. This observation is based on CS’s proprietary Global Risk Appetite Index (GRAI), which has been constructed using data going back to the early 80s.
The bank doesn’t reveal how it calculates the GRAI exactly, but it explains that the:
…GRAI is the slope of a cross-sectional, weighted, linear regression of a 6-month excess return measure (y-axis) on 12-month price variability (x-axis). This regression is estimated daily using rolling windows of data.
Currently, the returns of 64 country-based assets are used in the calculation. The constituents are broad equity and government bond indexes from developed countries and many of the more important and accessible emerging markets. These assets form a...
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