Risk aversion, multivariate proxies and the behavior of asset returns

Kim Nummelin
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Kim Nummelin: Swedish School of Economics and Business Administration, Finland

Finnish Economic Papers, 1994, vol. 7, issue 2, 94-107

Abstract: An asset pricing model with constant relative risk aversion (CRRA) is tested with data from Sweden for the period 1977-1990. As a proxy for consumption growth, we employ a return based mimicking portfolio. We find that significant structural shifts in the model parameters occur between 1977-83 and 1984-90. The results indicate that the goodness-of-fit for the model in the two subperiods is fairly good and the estimates of CRRA seem reasonable. However, contrary to the cross-sectional implications of the model, CRRAs implied from individual assets differ a lot from each other.

JEL-codes: G12 (search for similar items in EconPapers)
Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:fep:journl:v:7:y:1994:i:2:p:94-107

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