Risk Aversion Versus Intertemporal Substitution: A Case Study of Identification Failure in the Intertemporal Consumption Capital Asset Pricing Model
- Topics:
- Investment and Capital Markets
- Tags:
- Asset Management,
- Business Operations,
- Capital Asset Pricing Model,
- Failure,
- Operational Planning,
- University Of Iowa
- Source:
- University of Iowa
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Overview: The white paper deals with the disparate estimates of the fundamental parameter not to failures of instrument admissibility as do Hall (1988) and Hansen-Singleton (1996), but rather to failures of instrument relevance. That is, the disparate estimates reflect near non-identification due to the unpredictability of asset returns and consumption growth. Imposing natural identifying restrictions from the risk aversion perspective and the inter-temporal substitution perspective yields low and stable estimates in each case.
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Format: PDF | Size: 355KB | Date: Mar 2000 | Pages: 33
