Broad descriptions, not fixed baskets.
Risk-on and risk-off are broad descriptions rather than fixed baskets. Relationships can change by regime, valuation, and the cause of the shock.
| Concept | Explanation | |---|---| | Risk-on | Investors favor growth, cyclicality, leverage, and volatility. | | Risk-off | Investors prioritize liquidity, quality, and capital preservation. | | Flight to quality | Capital moves toward assets perceived as safer. | | Flight to liquidity | Participants prefer instruments that can be sold quickly. | | Correlation spike | Different risky assets begin moving together during stress. |