Empirical Selection of Optimal Portfolios and its Influence in the Estimation of Kreps-Porteus Utility Function Parameters

Adriano Faria, Rafael Ornelas and Caio Almeida ()

Brazilian Review of Econometrics, 2016, vol. 36, issue 1

Abstract: This paper investigates the effects on the estimation of parameters related to the elasticity of intertemporal substitution and risk aversion, of the selection of different portfolios to represent the optimal aggregate wealth endogenously derived in equilibrium models with Kreps-Porteus recursive utility. We argue that the usual stock market wide index is not a good portfolio to represent optimal wealth of the representative agent, and we propose as an alternative the portfolio from the Investment Fund Industry. Especially for Brazil, where that industry invests most of its resources in fixed income, the aforementioned substitution of the optimal proxy portfolio caused a significant increase in the risk aversion coefficient and the elasticity of the intertemporal substitution in consumption.

Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://periodicos.fgv.br/bre/article/view/51595 (text/html)

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:sbe:breart:v:36:y:2016:i:1:a:51595

Access Statistics for this article

Brazilian Review of Econometrics is currently edited by Daniel Monte

More articles in Brazilian Review of Econometrics from Sociedade Brasileira de Econometria - SBE Contact information at EDIRC.
Bibliographic data for series maintained by Núcleo de Computação da FGV EPGE ().