Asset Pricing under Quantile Utility Maximization
"Focus on the downside, and the upside will take care of itself" is a famous quote among professional investors. By considering an agent who follows this advice, we reproduce the first and second moments of stock returns, risk-free rate and consumption growth. The agent´s behavior towards risk is analogous to a relative risk aversion of about 3 under expected utility, the elasticity of intertemporal substitution is about 0.5 and the time discount factor is below 1. In particular, the proposed model separates time and risk preferences in an innovative way.
|Date of creation:||10 Sep 2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.fea.usp.br/feaecon/
More information through EDIRC
|Order Information:|| Email: |
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.:
- Garcia, R. & Bonomo, M., 1993.
"Disappointment Aversion as a Solution to the Equity Premium and the Risk- Free Rate Puzzles,"
Cahiers de recherche
9334, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Marco Bonomo & René Garcia, 1994. "Disappointment Aversion as a Solution to the Equity Premium and the Risk-Free Rate Puzzles," CIRANO Working Papers 94s-14, CIRANO.
- Marco Antonio Bonomo & Rene Garcia, 1993. "Disappointment aversion as a solution to the equity premium and the risk-free rate puzzles," Textos para discussão 308, Department of Economics PUC-Rio (Brazil).
- Bruno Feunou & Mohammad R. Jahan-Parvar & Roméo Tédongap, 2013. "Modeling Market Downside Volatility," Review of Finance, European Finance Association, vol. 17(1), pages 443-481.
- Gary V. Engelhardt & Anil Kumar, 2008.
"The elasticity of intertemporal substitution: new evidence from 401(k) participation,"
0812, Federal Reserve Bank of Dallas.
- Engelhardt, Gary V. & Kumar, Anil, 2009. "The elasticity of intertemporal substitution: New evidence from 401(k) participation," Economics Letters, Elsevier, vol. 103(1), pages 15-17, April.
When requesting a correction, please mention this item's handle: RePEc:spa:wpaper:2012wpecon16. 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: (Pedro Garcia Duarte)
If references are entirely missing, you can add them using this form.