TitleTime variability in market risk aversion
Publication TypeJournal Articles
Year of Publication2009
AuthorsBerger, D, Turtle, HJ
JournalJournal of Financial Research
Volume32
Issue3
Pagination285-307
Date Published2009
KeywordsFinance, MBA
Abstract

We adopt realized covariances to estimate the coefficient of risk aversion across portfolios and through time. Our approach yields second moments that are free from measurement error and not influenced by a specified model for expected returns. Supporting the permanent income hypothesis, we find risk aversion responds to consumption smoothing behavior. As income increases, or as the ratio of consumption-to-income falls, relative risk aversion decreases. We also document variation in risk aversion across portfolios: risk aversion is highest for small and value portfolios.

URLhttp://www.blackwellpublishing.com/journal.asp?ref=0270-2592
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