Published On: Mon, Apr 8th, 2013

Market risk appetite

A measure of how much risk an investor is willing to take on a given trade, stock, option or security.

A willingness to take on high risk may indicate an over-valuation in a particular stock or asset that may or may not have a large market correction in the future.   On the opposite end, investors shifting to low risk, safe markets may be indicating a lack of optimism that the market is performing well and will seek relative protection of their assets.

Analysts also use data about equity market returns, corporate credit spreads and predictions on economic growth to help measure risk appetite.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.