Intertemporal Substitution and Risk Aversion

Lars Peter Hansen, John Heaton, Junghoon Lee and Nikolai Roussanov

Chapter 61 in Handbook of Econometrics, 2007, vol. 6A from Elsevier

Abstract: We study structural models of stochastic discount factors and explore alternative methods of estimating such models using data on macroeconomic risk and asset returns. Particular attention is devoted to recursive utility models in which risk aversion can be modified without altering intertemporal substitution. We characterize the impact of changing the intertemporal substitution and risk aversion parameters on equilibrium short-run and long-run risk prices and on equilibrium wealth.

JEL-codes: C39 (search for similar items in EconPapers)
Date: 2007
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