Risk Aversion and Determinants of Stock Market Behavior / Robert S. Pindyck.

Format:

Book

Author/Creator:

Pindyck, Robert S.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1921.

NBER working paper series no. w1921

Language:

English

Subjects (All):

Risk--Mathematical models.

Risk.

Stock exchanges--Mathematical models.

Stock exchanges.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1986.

Cambridge, MA : National Bureau of Economic Research, 1986.

Summary:

A simple model of equity pricing is developed to address two related questions. First, to what extent can unanticipated changes in such"fundamental" variables as profitability, real interest rates, inflation, and the variance of returns account for the observed behavior of the stockmarket? Second, how risk averse are investors in the aggregate?We find that the pretax profit rate and the variance of returns are both significant explanators of the market, and interest rates somewhat less so. Estimates of the index of relative risk aversion are obtained that put that parameter in the range of 3 to 4.

Notes:

Print version record

May 1986.