Abstract
In asset pricing theory, recursive utility function contains three behavior parameters: subjective discount factor, coefficient of relative risk aversion and intertemporal elasticity of substitution. In common parlance, recursive utility permits the disentangling of the two psychologically separate concepts of risk aversion and elasticity of intertemporal substitution, which for the traditional time-additive utility functions are constrained to be equal to the inverse of each other. This paper estimates the three behavior parameters of investors in Shanghai stock market and Shenzhen stock market respectively through the general method of moment (GMM). The results show that the signs of the coefficient of relative risk aversion and of the intertemporal elasticity of substitution are different, which means that investors have different attitudes to the risk across states of nature and the risk over time in China.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
