Canadian Excess Returns and State-Dependent Risk Aversion
AbstractA discrete-time asset pricing model is developed for the situation where the representative agent has state-dependent risk aversion. The limiting continuous-time case is obtained and contrasted with Breeden's (1979) consumption-based capital asset pricing model. The essential feature is the presence of an additional `concavity risk', which supplements the usual consumption risk. The implication is that consumption covariance is no longer forced to account for the entire observed premia, which can therefore be replicated at lower levels of risk aversion. Using Canadian wealth data compiled by Macklem (1994), as well as a leading indicator proxy for state variables, the model is estimated using TSE-300 data, based on the exact likelihood parameterisation for continuous-time models. Results reveal a counter-cyclical pattern to risk aversion, and a mean value well within what is considered as reasonable range.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Laval - Recherche en Politique Economique in its series Papers with number 9519.
Length: 22 pages
Date of creation: 1995
Date of revision:
Contact details of provider:
Postal: UNIVERSITE LAVAL, GREPE DEPARTEMENT D'ECONOMIQUE, QUEBEC G1K 7P4.
Phone: (418) 656-5122
Fax: (418) 656-2707
Web page: http://www.ecn.ulaval.ca/
More information through EDIRC
CANADA; RISK AVERSION; SHARES;
Other versions of this item:
- ST-AMOUR, Pascal, 1995. "Canadian Excess Returns and State-Dependent Risk Aversion," Cahiers de recherche 9519, Université Laval - Département d'économique.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel).
If references are entirely missing, you can add them using this form.