Optimal Saving with Additive and Multiplicative Background Risk
We study optimal saving when incomes are certain and risk bears on consumption. A key finding is that, with CARA utility and additive uncertain consumption, or CRRA utility and multiplicative consumption, risk-averse individuals do not form precautionary saving as in the standard theory of saving under uncertainty.
|Date of creation:||01 Oct 2004|
|Date of revision:|
|Contact details of provider:|| Postal: Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium)|
Fax: +32 10473945
Web page: http://www.uclouvain.be/ires
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- DREZE, Jacques H. & MODIGLIANI, Franco, .
"Cosumption decisions under uncertainty,"
CORE Discussion Papers RP
119, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- A. Sandmo, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Oxford University Press, vol. 37(3), pages 353-360.
- Kimball, Miles S, 1990.
"Precautionary Saving in the Small and in the Large,"
Econometric Society, vol. 58(1), pages 53-73, January.
- Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
- Hayne E. Leland, 1968. "Saving and Uncertainty: The Precautionary Demand for Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 82(3), pages 465-473.
- Günter Franke & Harris Schlesinger & Richard C. Stapleton, 2003. "Multiplicative Background Risk," CoFE Discussion Paper 03-05, Center of Finance and Econometrics, University of Konstanz.
- Christian Gollier, 2004. "The Economics of Risk and Time," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262572249.
When requesting a correction, please mention this item's handle: RePEc:ctl:louvir:2004030. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anne DAVISTER-LOGIST)
If references are entirely missing, you can add them using this form.