Estimation of relative risk aversion across time

Thomas E. Conine, Michael B. McDonald and Maurry Tamarkin

Applied Economics, 2017, vol. 49, issue 21, 2117-2124

Abstract: This article examines relative risk aversion in the framework of a three-moment asset pricing model that accounts for skewness. Accounting for skewness in calculating risk aversion gives a more accurate series of estimates of risk aversion and helps to reconcile the wide disparity in risk coefficients found in past literature. Risk aversion coefficients are calculated from 1926 to 2014 using stock market returns. This procedure results in a time series of data that can be related to other variables such as real interest rates and changes in demand for various asset classes.

Date: 2017
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DOI: 10.1080/00036846.2016.1231910

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