Abstract
This note reports estimates of the coefficient of relative risk aversion, using a method recently proposed by Azar (Citation2006). 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.
Acknowledgements
The views expressed in this letter do not necessarily comply with those of the Deutsche Bundesbank. The author thanks Franz Seitz, University of Applied Sciences, Amberg-Weiden, for his valuable comments.
Notes
1 In contrast, plugging in Azar's preferred estimate for γ of 4.5 would solve Equation Equation1 if the risk free rate would have been 1.39% rather than 4.1%.
2 In the latter case the resampling procedure also includes the risk free rates by drawing both returns, and
, from the same period i.
3 Azar (Citation2006) provides an overview.