TY  - JOUR
AU  - Pindyck,Robert S.
TI  - Risk Aversion and Determinants of Stock Market Behavior
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1921
PY  - 1986
Y2  - May 1986
UR  - http://www.nber.org/papers/w1921
L1  - http://www.nber.org/papers/w1921.pdf
N1  - Author contact info:
Robert S. Pindyck
MIT Sloan School of Management
100 Main Street, E62-522
Cambridge, MA  02142
Tel: 617/253-6641
Fax: 617/258-6855
E-Mail: RPINDYCK@MIT.EDU
AB  - 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.
ER  -