Approximation bias in estimating risk aversion

Joseph G. Eisenhauer ()
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Joseph G. Eisenhauer: Canisius College

Economics Bulletin, 2003, vol. 4, issue 38, 1-10

Abstract: The asymmetric approximation originally employed by Pratt (1964) to construct reduced-form measures of risk aversion s a downward bias when used for empirical estimation. Calculations based on recent survey data indicate that estimates from a symmetric approximation are generally three times larger than their asymmetric counterparts, a finding that may help to explain the equity premium puzzle.

JEL-codes: D8 G0 (search for similar items in EconPapers)
Date: 2003-12-19
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Citations: View citations in EconPapers (2)

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