Asset Demands and Asset Prices in the U.K.: Is There a Risk Premium

Christopher Green

The Manchester School of Economic & Social Studies, 1990, vol. 58, issue 3, 211-28

Abstract: This paper argues that conventional methods for estimating portfolio demand functions and asset pricing equations are often incorrect. The method used here is to invert theoretically plausible asset demands to obtain asset price expectation formation equations that can be estimated by ordinary least squares and which can be used to test the capital asset pricing model. Using this method, U.K. private sector data from the 1970s are able to accept an impressive array of economically meaningful restrictions. However, a central puzzle is that the coefficient of relative risk aversion is found to be significant but negative. Copyright 1990 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1990
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Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:58:y:1990:i:3:p:211-28

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