We develop a new class of utility functions, SAHARA utility, with the distinguishing feature that it allows absolute risk aversion to be non-monotone and implements the assumption that agents may become less risk-averse for very low values of wealth. The class contains the well-known exponential...

We develop a new class of utility functions, SAHARA utility, with the distinguishing feature that it allows absolute risk aversion to be non-monotone and implements the assumption that agents may become less risk-averse for very low values of wealth. The class contains the well-known exponential...

This paper estimates relative risk aversion using the observed shares of risky assets and characteristics of households from the Household Finance and Consumption Survey of the European Central Bank. Given that the risky share is a fractional response variable belonging to [0, 1], this paper...

This paper estimates relative risk aversion using the observed share of risky assets and characteristics of households. By assuming a participation cost of risky asset market and treating zero risky shares as a result of heterogeneous self-censoring, I estimate relative risk aversion and...

Optimal portfolio rules are derived under uncertainty aversion by formulating the portfolio choice problem as a robust control problem. The robust portfolio rule indicates that the total holdings of risky assets as a proportion of the investor's wealth could increase as compared to the holdings...

We compare several representative sophisticated model averaging and variable selection techniques of forecasting stock returns. When estimated traditionally, our results confirm that the simple combination of individual predictors is superior. However, sophisticated models improve dramatically...