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Risk Aversion, Intertemporal Elasticity of Substitution and Correlation Aversion


  • Antoine Bommier

    () (CNRS and University of Toulouse)


Intertemporal correlation aversion is an intuitive concept indicating whether an individual prefers lotteries concerning consumption at different moments in time to be positively or negatively correlated. I show that the difference between the coefficient of relative risk aversion and the inverse of the intertemporal elasticity of substitution is related, in a simple way, to the index of intertemporal correlation aversion.

Suggested Citation

  • Antoine Bommier, 2007. "Risk Aversion, Intertemporal Elasticity of Substitution and Correlation Aversion," Economics Bulletin, AccessEcon, vol. 4(29), pages 1-8.
  • Handle: RePEc:ebl:ecbull:eb-06d90002

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    References listed on IDEAS

    1. Kihlstrom, Richard E. & Mirman, Leonard J., 1974. "Risk aversion with many commodities," Journal of Economic Theory, Elsevier, vol. 8(3), pages 361-388, July.
    2. Philippe Weil, 1990. "Nonexpected Utility in Macroeconomics," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 29-42.
    3. Scott F. Richard, 1975. "Multivariate Risk Aversion, Utility Independence and Separable Utility Functions," Management Science, INFORMS, vol. 22(1), pages 12-21, September.
    4. Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-969, July.
    5. Epstein, Larry G., 1983. "Stationary cardinal utility and optimal growth under uncertainty," Journal of Economic Theory, Elsevier, vol. 31(1), pages 133-152, October.
    6. Finkelshtain, Israel & Kella, Offer & Scarsini, Marco, 1999. "On risk aversion with two risks," Journal of Mathematical Economics, Elsevier, vol. 31(2), pages 239-250, March.
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    Cited by:

    1. Loïc Berger & Johannes Emmerling, 2017. "Welfare as Simple(x) Equity Equivalents," Working Papers 2017.14, Fondazione Eni Enrico Mattei.
    2. Pierre Pestieau & Gregory Ponthiere, 2012. "The Public Economics of Increasing Longevity," Hacienda Pública Española, IEF, vol. 200(1), pages 41-74, March.
    3. Antoine Bommier & François Grand, 2014. "Too risk averse to purchase insurance?," Journal of Risk and Uncertainty, Springer, vol. 48(2), pages 135-166, April.
    4. Drouhin, Nicolas, 2015. "A rank-dependent utility model of uncertain lifetime," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 208-224.
    5. Crainich, David & Eeckhoudt, Louis & Le Courtois, Olivier, 2017. "Health and portfolio choices: A diffidence approach," European Journal of Operational Research, Elsevier, vol. 259(1), pages 273-279.
    6. Bommier, Antoine & Lanz, Bruno & Zuber, Stéphane, 2015. "Models-as-usual for unusual risks? On the value of catastrophic climate change," Journal of Environmental Economics and Management, Elsevier, vol. 74(C), pages 1-22.
    7. Thomas Epper & Helga Fehr-Duda, 2015. "Risk Preferences Are Not Time Preferences: Balancing on a Budget Line: Comment," American Economic Review, American Economic Association, vol. 105(7), pages 2261-2271, July.
    8. repec:hal:wpaper:halshs-01230932 is not listed on IDEAS
    9. Fabio C. Bagliano & Carolina Fugazza & Giovanna Nicodano, 2017. "A Life-Cycle Model with Unemployment Traps," Working papers 041, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    10. AJ A. Bostian & Christoph Heinzel, 2016. "Consumption Smoothing and Precautionary Saving under Recursive Preferences," FOODSECURE Working papers 44, LEI Wageningen UR.
    11. Yukihiro Nishimura & Pierre Pestieau & Grégory Ponthière, 2015. "Education Choices, Longevity and Optimal Policy in a Ben-Porath Economy," PSE Working Papers halshs-01230932, HAL.

    More about this item


    Correlation Aversion.;

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty


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