Substitution, Risk Aversion and the Temporal Behaviour of Consumption and Asset Returns I: A Theoretical Framework
AbstractThis paper investigates infinite horizon intertemporal utility functions which generalize the standard additive expected utility specification. Two classes of generalization are considered -- the first builds upon Kreps and Porteus (1978, 1979), while the second is a further generalization which embeds the non-expected utility theory of Dekel (1986) into a multiperiod framework. Each type of generalization permits intertemporal substitution and risk aversion to be disentangled. In the context of the representative agent model, each specification implies testable restrictions on the temporal behaviour of consumption and asset returns.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 699.
Length: 54 pages
Date of creation: 1987
Date of revision:
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