Abstract
A fundamental idea in modern asset pricing is that risk aversion may be time varying and countercyclical (Campbell and Cochrane 1999). Existing evidence is scant and based mostly on experimental or survey data. We aim to test this key assumption using a large panel of real-world transaction data. Risk aversion is imputed from Chinese auto insurance policies, including 10 million transactions from 2011 to 2017 and representing the entire population of 200 million auto insurance policies in China. We find that individuals' risk aversion is indeed time varying and countercyclical.
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