TABLE OF CONTENTS
LIST OF TABLES vii
LIST OF FIGURES viii
CHAPTER ONE
INTRODUCTION 1
CHAPTER TWO
LITERATURE REVIEW 6
2.1 Theoretical Analysis 6
2.2 Recent Empirical Evidence 11
CHAPTER THREE
UNCAPITALIZED FUTURE INCOME 15
3.1 Introduction 15
3.2 A Two-period Model and the Main Finding 24
3.3 An Infinite Horizon Model 32
3.4 Discussion 37
Appendix 39
CHAPTER FOUR
INFERRING RISK AVERSION USING ONE PORTFOLIO DECISION 48
4.1 Introduction 48
4.2 Inferring Risk Aversion in the Small 52
4.3 Inferring Risk Aversion in the Large 56
4.4 Inferring Risk Aversion in the Large Using Functional Forms for Utility 60
4.5 Numerical Solutions 66
4.6 Conclusion 70
CHAPTER FIVE
REINTERPRETATION OF RECENT EMPIRICAL EVIDENCE 76
5.1 Introduction 76
5.2 Friend and Blume (1975) 80
5.3 Chiappori and Paiella (forthcoming) 86
5.4 Brunnermeier and Nagel (2008) 90
5.5 Summary and Discussion 96
REFERENCES 98
LIST OF TABLES
Table 1: The Magnitudes of Relative Risk Aversion at Four Values for the Risky Asset Return under Three Different Approaches 69
Table 2: Estimates of Relative Risk Aversion at Mean Risky Return for a Representative of Households in Six Net Financial Wealth Categories (Exclusive of Homes and Human Capital)
85
LIST OF FIGURES
Figure 4.1: relative risk aversion as a function of the risky return for 73
Figure 4.2: relative risk aversion as a function of the risky return for 74
Figure 4.3: relative risk aversion as a function of the risky return for 75
