Human capital and life-cycle effects on risk aversion

This paper provides additional evidence on life‐cycle patterns of relative risk aversion, using spline functions generated on Consumer Expenditure Survey data. Human capital is hypothesized to affect relative risk aversion; age has been used in previous work as a proxy for human capital. The objective of this study is to determine whether there is a life‐cycle pattern that is independent of the effect of human capital. The results suggest an affirmative answer. Moreover, this independent life‐cycle pattern is the opposite of that estimated in a previous study that used age as a proxy.