This paper explores theoretically and empirically the issue of time-varying relative risk aversion. We analytically solve a parsimonious life-cycle portfolio choice model with the preferences given by Greenwood, Hercowitz and Huffman (1988, GHH). Our analytical solution identifies four partial...

Varying-coefficient linear models arise from multivariate nonparametric regression, nonlinear time series modelling and forecasting, functional data analysis, longitudinal data analysis, and others. It has been a common practice to assume that the vary-coefficients are functions of a given...