Article ID Journal Published Year Pages File Type
5089110 Journal of Banking & Finance 2013 11 Pages PDF
Abstract
► We compare risk aversion estimates in complete- and incomplete-markets environments. ► For the incomplete-markets case, we use consumption data for the 50 US states. ► The rate of risk aversion under the incomplete-markets setup is much lower. ► Higher moments of the cross-sectional distribution of consumption growth matter. ► Market incompleteness helps explain the equity premium puzzle.
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Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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Market incompleteness and the equity premium puzzle: Evidence from state-level data
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