Estimating the uncertainty of relative risk aversion

Abstract

This note reports estimates of the coefficient of relative risk aversion, using a method recently proposed by Azar (2006 Azar, SA. 2006. Measuring relative risk aversion. Applied Financial Economics Letters, 2: 341–5. [Taylor & Francis Online] , [Google Scholar]). In contrast to his work, the complete information of US stock return data over the period 1926 to 2002 is utilized. Moreover, a bootstrap procedure is applied to estimate the associated uncertainty. Point estimates close to 3.5 are obtained. However, ranging from 1.4 to 7.1, the 95% confidence interval is wide.

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