Approximation bias in estimating risk aversion
AbstractThe asymmetric approximation originally employed by Pratt (1964) to construct reduced-form measures of risk aversion s a downward bias when used for empirical estimation. Calculations based on recent survey data indicate that estimates from a symmetric approximation are generally three times larger than their asymmetric counterparts, a finding that may help to explain the equity premium puzzle.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 4 (2003)
Issue (Month): 38 ()
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Find related papers by JEL classification:
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- G0 - Financial Economics - - General
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