Abstract: This paper uses monthly data from the Athens Stock Exchange, over 1994-2007, to explore the relationship between risk aversion and market efficiency. The approach is based on econometric testing of the efficient markets model with varying discount factors, using an error-correction representation of the information variables. In this setting, we are able to evaluate the economic significance of the model by determining whether deviations, which produce statistical rejections, are transitory or not. The empirical evidence points to statistical rejections of efficiency in the Greek stock market which, nevertheless, appear to be transitory when risk averse behavior of investors is accounted for.