Yosef Bonaparte, Frank J Fabozzi
Applied Economics,Pages: 1-11.
In this article, we estimate the risk aversion for households accounting for their lifetime consumption risk. Households take into account the overall lifetime uninsured consumption risk when optimizing their resources, which based on micro data varies across households. Thus, representing households’ consumption by merging cross-sectional micro data into the single Euler equation (the common approach for estimating risk aversion based on consumption-based asset pricing theory) may be too rough an approximation, leading …