The Cross-Section of Household Preferences

Laurent Calvet, John Campbell, Francisco Gomes and Paolo Sodini

No 16105, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper estimates the cross-sectional distribution of Epstein-Zin preferences using the wealth and risky portfolio shares of a large panel of Swedish households. We find heterogeneous risk aversion (a standard deviation of 1.06 with a mean/median of 7.57/7.50), time preference rate (standard deviation 6.96% with a mean/median of 5.21/3.15%) and elasticity of intertemporal substitution (standard deviation 0.90 with a mean/median of 0.96/0.50). Risk aversion and the EIS are only very weakly negatively correlated. We estimate lower risk aversion for households with riskier labor income, and a higher TPR and lower EIS for households who enter our sample with low wealth.

Keywords: indirect inference; Epstein-zin preferences; Risk aversion; Life-cycle model; Elasticity of intertemporal substitution; Time preference rate (search for similar items in EconPapers)
JEL-codes: D14 D91 G11 G51 (search for similar items in EconPapers)
Date: 2021-05
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Working Paper: The Cross-Section of Household Preferences (2021)
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