Reinterpreting a Temporally Aggregated Consumption CAP Model

Luigi Ermini

Journal of Business & Economic Statistics, 1991, vol. 9, issue 3, 325-28

Abstract: Recent literature has found that the coefficient of relative risk aversion estimated through consumption-based asset-pricing models is implausibly high, even when the phenomenon of temporal aggregation is taken into account. This article suggests that an IMA (1, 1) process be assumed as the generating mechanism of consumption, instead of the standard random-walk process. In this case, if the coefficient of the moving average component is negative, the implied value of the coefficient of relative risk aversion can be reduced to plausible levels. Some empirical and theoretical support for the IMA (1, 1) hypothesis is also presented and discussed.

Date: 1991
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:9:y:1991:i:3:p:325-28

Ordering information: This journal article can be ordered from
http://www.amstat.org/publications/index.html

Access Statistics for this article

Journal of Business & Economic Statistics is currently edited by Jonathan H. Wright and Keisuke Hirano

More articles in Journal of Business & Economic Statistics from American Statistical Association
Bibliographic data for series maintained by Christopher F. Baum ().