RELATIVE RISK AVERSION IS CONSTANT: EVIDENCE FROM PANEL DATA
نویسندگان
چکیده
منابع مشابه
Relative Risk Aversion Is Constant: Evidence from Panel Data
Most classical tests of constant relative risk aversion (CRRA) based on individual portfolio composition use cross sectional data. Such tests must assume that the distributions of wealth and preferences are independent. We use panel data to analyze how individuals’ portfolio allocation between risky and riskless assets varies in response to changes in total financial wealth. We find the elastic...
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We analyze whether relative risk aversion is time-varying with households’ portfolio choice data. We first derive theoretical predictions on how risky shares respond to wealth fluctuations in a portfolio choice model with both external habits and timevarying labor income. Our analytical results indicate that: (1) for each household, there are two channels through which the risky share responds ...
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An axiomatic characterization of recursive utility with source-dependent constant relative risk aversion (CRRA), constant elasticity of intertemporal substitution, constant rate of impatience and subjective beliefs is established. The utility form is a minimal extension of Epstein-Zin-Weil utility that allows the CRRA to depend on the source of risk, a dependence that admits an ambiguity aversi...
متن کاملDoes Relative Risk Aversion Vary with Wealth? Evidence from Households’ Portfolio Choice Data∗
In this article, we explore whether relative risk aversion varies with wealth. First, we derive theoretical predictions on how risky shares respond to wealth fluctuations in a portfolio choice model with both external habits and time-varying labor income. Our analytical results indicate that: (1) for each household, there are two channels through which the risky share responds to wealth fluctua...
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The testable implication of the complete risk-sharing hypothesis depends on what is assumed on households' relative risk aversion (RRA) coefficient. We therefore use a hyperbolic absolute risk aversion (HARA) utility function, which includes increasing, constant, and decreasing RRA as special cases, to test this hypothesis. Using household level total non-durable consumption data from Indian vi...
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ژورنال
عنوان ژورنال: Journal of the European Economic Association
سال: 2011
ISSN: 1542-4766
DOI: 10.1111/j.1542-4774.2011.01046.x