Power Risk Aversion Utility Functions
AbstractThis paper introduces a new class of utility function -- the power risk aversion.It is shown that the CRRA and CARA utility functions are both in this class. The implications of the PRA utility functions are explored in the context of growth theory. In particular, it is found that economies facing a common real interest rate do not necessarily grow at the same rates if they start with different levels of capital stock. Thus diversity in growth performance across countries occurs even if these countries have access to perfect international capital markets. Potential applications of the PRA in asset pricing are considered.
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Bibliographic InfoPaper provided by EconWPA in its series International Finance with number 0207006.
Length: 18 pages
Date of creation: 22 Aug 2002
Date of revision:
Note: Type of Document - Acrobat PDF; prepared on PC; to print on HP/PostScript/Franciscan monk; pages: 18; figures: Included
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Power Risk Aversion; Growth; Asset Pricing;
Other versions of this item:
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-08-29 (All new papers)
- NEP-DGE-2002-08-29 (Dynamic General Equilibrium)
- NEP-MIC-2002-09-03 (Microeconomics)
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