COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1382

Risk Aversion and Stock Prices

Ray C. Fair

September 2002
Revised February 2003

This paper uses data on companies that have been in the S&P 500 index since 1957 to examine whether risk aversion has decreased since 1995. The evidence suggests that it has not. There is no evidence that more risky companies have had larger increases in their price-earnings ratios since 1995 than less risky companies.

Keywords: Risk aversion, Stock prices

JEL Classification: G12