<p>There are many estimates in the literature. For example, <a href="http://ies.fsv.cuni.cz/sci/publication/show/id/4902/lang/cs">Havranek (2013)</a> does a meta-analysis of avalible results and argues for a value of intertemporal elasticity (inverse of sigma in your notation) around 0.3-0.4. But it might also depend on what your goal is - the single parameter in CRRA utility controls both risk aversion and intertemporal smoothing motive, so a calibration for asset-pricing model might need to differ from let's say a deterministic growth model.</p>

CC BY-SA 3.0
2014-12-16T01:05:13.923Z
that Havranek paper is great. Lots of upward publication bias in the empirical EIS literature - which makes the contrast between the low estimates there and the high ones that Epstein-Zin finance guys need even more striking.
nominally rigid
CC BY-SA 3.0
2014-12-14T14:33:20.027Z
2014-12-14T14:33:20.027Z
ivansml
<p>In <a href="http://ageconsearch.umn.edu/bitstream/30810/1/18010017.pdf" rel="nofollow noreferrer">Babcock, B. A., Choi, E. K., &amp; Feinerman, E. (1993). Risk and probability premiums for CARA utility functions. Journal of Agricultural and Resource Economics, 17-24.</a> (downloadable) we find the following table (the first column is the coefficient of absolute risk aversion)</p>

<p><img src="https://i.sstatic.net/YoRO5.png" alt="enter image description here"></p>

<p>You can download the paper and trace the papers which it summarizes in the table.</p>

CC BY-SA 3.0
2014-12-14T11:47:38.850Z
This is micro data based on lottery picks, this is useful, but not exactly what I need, I need some estimates based on macro US data.
Andrii Kapinos
CC BY-SA 3.0
2014-12-14T11:42:01.677Z
2014-12-14T11:42:01.677Z
Alecos Papadopoulos
<p>I am working on macroeconomic model and I need to calibrate it.
I am looking primarily for a statistically-founded estimate for the 
coefficient of relative risk aversion in the CRRA utility 
function based on macroeconomic US data (but also for the coefficient of absolute risk aversion for the case of a CARA utility function). Cannot seem to find it anywhere.
Can anybody help?</p>

CC BY-SA 3.0
2014-12-14T10:52:57.310Z
Is there a particular reason why you want to use CARA and not CRRA utility?
Alecos Papadopoulos
CC BY-SA 3.0
2014-12-14T11:50:05.060Z
u(c)=(c^(1-σ))/(1-σ); I need an estimate for sigma
Andrii Kapinos
CC BY-SA 3.0
2014-12-14T11:52:19.053Z
sorry, I ment CRRA
Andrii Kapinos
CC BY-SA 3.0
2014-12-14T12:01:00.173Z
You just made my answer irrelevant. But since CRRA estimates are all over the place, maybe I will find something about it also.
Alecos Papadopoulos
<macroeconomics><utility><risk-aversion>
Empirical estimates of CRRA and CARA utility
Andrii Kapinos
# Empirical estimates of CRRA and CARA utility

(Asked by: username_0 on 2014-12-14)

I am working on macroeconomic model and I need to calibrate it.
I am looking primarily for a statistically-founded estimate for the
coefficient of relative risk aversion in the CRRA utility
function based on macroeconomic US data (but also for the coefficient of absolute risk aversion for the case of a CARA utility function). Cannot seem to find it anywhere.
Can anybody help?

**Tags:** macroeconomics, utility, risk-aversion

> **Comments:**
> **username_1**: Is there a particular reason why you want to use CARA and not CRRA utility?  
> **username_0**: u(c)=(c^(1-σ))/(1-σ); I need an estimate for sigma  
> **username_0**: sorry, I ment CRRA  
> **username_1**: You just made my answer irrelevant. But since CRRA estimates are all over the place, maybe I will find something about it also.  

---

## 2 answers

### Answer by username_1 on 2014-12-14. Score: 3 | Accepted answer

In [Babcock, B. A., Choi, E. K., & Feinerman, E. (1993). Risk and probability premiums for CARA utility functions. Journal of Agricultural and Resource Economics, 17-24.](http://ageconsearch.umn.edu/bitstream/30810/1/18010017.pdf) (downloadable) we find the following table (the first column is the coefficient of absolute risk aversion)

![enter image description here](https://i.sstatic.net/YoRO5.png)

You can download the paper and trace the papers which it summarizes in the table.

> **Comments:**
> **username_0**: This is micro data based on lottery picks, this is useful, but not exactly what I need, I need some estimates based on macro US data.  

---

### Answer by username_2 on 2014-12-14. Score: 7

There are many estimates in the literature. For example, [Havranek (2013)](http://ies.fsv.cuni.cz/sci/publication/show/id/4902/lang/cs) does a meta-analysis of avalible results and argues for a value of intertemporal elasticity (inverse of sigma in your notation) around 0.3-0.4. But it might also depend on what your goal is - the single parameter in CRRA utility controls both risk aversion and intertemporal smoothing motive, so a calibration for asset-pricing model might need to differ from let's say a deterministic growth model.

> **Comments:**
> **username_3**: that Havranek paper is great. Lots of upward publication bias in the empirical EIS literature - which makes the contrast between the low estimates there and the high ones that Epstein-Zin finance guys need even more striking.  

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