Douglas W. Caves, Laurits R. Christensen, W. Erwin Diewert, The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity, Econometrica, Vol. 50, No. 6 (Nov., 1982), pp. 1393-1414
W. S. Hopwood, J. C. Mckeown, P. Newbold, The Additional Information Content of Quarterly Earnings Reports: Intertemporal Disaggregation, Journal of Accounting Research, Vol. 20, No. 2, Part I (Autumn, 1982), pp. 343-349
The Review of Economics and Statistics198264(3), 481
THROUGH cross-sectional analysis of the asset holdings of individual households, this study adds to the evidence available on relative risk aversion. It utilizes the National Longitudinal Surveys (NLS)1 which have advantages over the data bases used in previous studies. Assumptions about relative risk aversion are made in a number of theoretical economic and financial models.2 An empirical study by Cohn, Lewellen, Lease, and Schlarbaum (CLLS, 1975) concluded that relative risk aversion declined as wealth increased across households, while a second empirical study by Friend and Blume (F&B 1975) concluded from mixed evidence that relative risk aversion remained relatively constant as wealth increased. The present study finds that by restricting the sample to higher wealth households and by defining wealth narrowly, patterns consistent with decreasing or constant relative risk aversion emerge and these are compatible with the earlier studies. However, the use of a broader based sample and a more comprehensive measurement of wealth alters the conclusions and a pattern indicative of increasing relative risk aversion emerges. Thus, the paper cautions that constant or decreasing relative risk aversion assumptions in theoretic models may not be realistic descriptions of the risk attitudes of typical U.S. households. First, the literature on relative risk aversion will be reviewed. Second, the model used to estimate the coefficient of relative risk aversion will be discussed. The third section will present empirical results and contrast them with those of earlier studies. Finally, the material will be summarized and the conclusions indicated.
W. F. Sharpe, Plasm: Pension Liability and Asset Simulation Model: Discussion, The Journal of Finance, Vol. 37, No. 2, Papers and Proceedings of the Fortieth Annual Meeting of the American Finance Association, Washington, D.C., December 28-30, 1981 (May, 1982), pp. 604-606
This paper presents a parametric example of a one-asset exchange economy in which the asset price is endogenously determined. It is demonstrated that the volatility of the asset's price uniformly violates the theoretical upper bound implied by the present value relation. In addition, the variance bounds may be violated by a significant margin at the same time the asset's price is almost a random walk. The example has a dual interpretation as a consumption function, and under this interpretation it is demonstrated that the permanent-income hypothesis does not necessarily restrict the time-series properties of consumption.
This paper generalizes the Durbin-Watson type statistics to test the OLS residuals from the fixed effects model for serial independence. Also generalized are the tests proposed by Sargan and Bhargava for the hypothesis that the residuals form a random walk. A method for efficient estimation of the parameters is also developed. Finally, an earnings function is estimated using the Michigan Survey of Income Dynamics in order to illustrate the uses of the tests and the estimation procedures developed in this paper.