01897cam a22002537 4500001000600000003000500006005001700011008004100028100001500069245012900084260006600213490004100279500001600320520091000336530006101246538007201307538003601379700002101415700001601436710004201452830007601494856003701570856003601607w3643NBER20190825134825.0190825s1991 mau||||fs|||| 000 0 eng d1 aChou, Ray.10aMeasuring Risk Aversion From Excess Returns on a Stock Indexh[electronic resource] /cRay Chou, Robert F. Engle, Alex Kane. aCambridge, Mass.bNational Bureau of Economic Researchc1991.1 aNBER working paper seriesvno. w3643 aMarch 1991.3 aWe distinguish the measure of risk aversion from the slope coefficient in the linear relationship between the mean excess return on a stock index and its variance. Even when risk aversion is constant, the latter can vary significantly with the relative share of stocks in the risky wealth portfolio, and with the beta of unobserved wealth on stocks. We introduce a statistical model with ARCH disturbances and a time-varying parameter in the mean (TVP ARCH-N). The model decomposes the predictable component in stock returns into two parts: the time-varying price of volatility and the time-varying volatility of returns. The relative share of stocks and the beta of the excluded components of wealth on stocks are instrumented by macroeconomic variables. The ratio of corporate profit over national income and the inflation rate ore found to be important forces in the dynamics of stock price volatility. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.1 aEngle, Robert F.1 aKane, Alex.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w3643.4 uhttp://www.nber.org/papers/w364341uhttp://dx.doi.org/10.3386/w3643