Discussion paper

DP16105 The Cross-Section of Household Preferences

This paper estimates the cross-sectional distribution of Epstein-Zin preferences using the wealth and risky portfolio shares of a large panel of Swedish households. We find heterogeneous risk aversion (a standard deviation of 1.06 with a mean/median of 7.57/7.50), time preference rate (standard deviation 6.96% with a mean/median of 5.21/3.15%) and elasticity of intertemporal substitution (standard deviation 0.90 with a mean/median of 0.96/0.50). Risk aversion and the EIS are only very weakly negatively correlated. We estimate lower risk aversion for households with riskier labor income, and a higher TPR and lower EIS for households who enter our sample with low wealth.


Calvet, L, J Campbell, F Gomes and P Sodini (2021), ‘DP16105 The Cross-Section of Household Preferences‘, CEPR Discussion Paper No. 16105. CEPR Press, Paris & London. https://cepr.org/publications/dp16105