Risk Aversion and the Elasticity of Intertemporal Substitution among Australian Households

Owen Freestone () and Robert Breunig

The Economic Record, 2020, vol. 96, issue 313, 121-139

Abstract: This paper explores the degree of risk aversion amonsg Australian households using panel data from the Household Income and Labour Dynamics in Australia (HILDA) Survey. Using households' share of risky assets, we test whether relative risk aversion is constant in wealth. After accounting for measurement error, we cannot reject the constant relative risk aversion (CRRA) assumption. Using a CRRA utility function, we estimate the elasticity of intertemporal substitution and infer a coefficient of relative risk aversion of 1.2 to 1.4. These findings can provide guidance for calibrating household preferences in macroeconomic models of the Australian economy.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/1475-4932.12538

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:bla:ecorec:v:96:y:2020:i:313:p:121-139

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0013-0249

Access Statistics for this article

The Economic Record is currently edited by Paul Miller, Glenn Otto and Martin Richardson

More articles in The Economic Record from The Economic Society of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().