A Robust Approach to Risk Aversion
We investigate whether the set of Kreps and Porteus (1978) preferences include classes of preferences that are stationary, monotonic and well-ordered in terms of risk aversion. We prove that the class of preferences introduced by Hansen and Sargent (1995) in their robustness analysis is the only one that fulfills these properties. The paper therefore suggests a shift from the traditional approach to studying the role of risk aversion in recursive problems. We also provide applications, in which we discuss the impact of risk aversion on asset pricing and risk sharing.
|Date of creation:|
|Contact details of provider:|| Postal: ETH Zentrum KPL F 38.1, Kreuzplatz 5, 8032 Zürich|
Phone: +41 1 632 57 18
Fax: +41 1 632 10 47
Web page: http://web.sg.ethz.ch/wps
More information through EDIRC
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.:
- Antoine Bommier & Arnold Chassagnon & François Legrand, 2010.
"Comparative Risk Aversion: A Formal Approach with Applications to Savings Behaviors,"
- Bommier, Antoine & Chassagnon, Arnold & Le Grand, François, 2012. "Comparative risk aversion: A formal approach with applications to saving behavior," Journal of Economic Theory, Elsevier, vol. 147(4), pages 1614-1641.
- Bommier, Antoine & Chassagnon, Arnold & Le Grand, François, 2010. "Comparative Risk Aversion: A Formal Approach with Applications to Savings Behaviors," TSE Working Papers 10-141, Toulouse School of Economics (TSE).
- Antoine Bommier & Arnold Chassagnon & François Le Grand, 2010. "Comparative Risk Aversion: A Formal Approach with Applications to Saving Behaviors," CER-ETH Economics working paper series 10/134, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
- 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.
- Kristof Bosmans, 2005.
"Comparing degrees of inequality aversion,"
Working Papers Department of Economics
ces0517, KU Leuven, Faculty of Economics and Business, Department of Economics.
- Jessica A. Wachter & Motohiro Yogo, 2010.
"Why Do Household Portfolio Shares Rise in Wealth?,"
NBER Working Papers
16316, National Bureau of Economic Research, Inc.
- Thomas Tallarini, "undated".
"Risk-Sensitive Real Business Cycles,"
GSIA Working Papers
1997-35, Carnegie Mellon University, Tepper School of Business.
- Epstein, Larry G., 1983. "Stationary cardinal utility and optimal growth under uncertainty," Journal of Economic Theory, Elsevier, vol. 31(1), pages 133-152, October.
- Chew, Soo Hong & Epstein, Larry G., 1990. "Nonexpected utility preferences in a temporal framework with an application to consumption-savings behaviour," Journal of Economic Theory, Elsevier, vol. 50(1), pages 54-81, February.
- Hansen, Lars Peter & Jagannathan, Ravi, 1991.
"Implications of Security Market Data for Models of Dynamic Economies,"
Journal of Political Economy,
University of Chicago Press, vol. 99(2), pages 225-262, April.
- Lars Peter Hansen & Ravi Jagannathan, 1990. "Implications of Security Market Data for Models of Dynamic Economies," NBER Technical Working Papers 0089, National Bureau of Economic Research, Inc.
- Lars Peter Hansen & Ravi Jagannathan, 1990. "Implications of security market data for models of dynamic economies," Discussion Paper / Institute for Empirical Macroeconomics 29, Federal Reserve Bank of Minneapolis.
- Grant, Simon & Quiggin, John, 2004.
"Increasing Uncertainty: A Definition,"
Risk and Sustainable Management Group Working Papers
151163, University of Queensland, School of Economics.
- Simon Grant & John Quiggin, 2004. "Increasing Uncertainty: A Definition," Risk & Uncertainty Working Papers WPR04_4, Risk and Sustainable Management Group, University of Queensland.
- Grant, Simon & Quiggan, John, 2004. "Increasing Uncertainty: A Definition," Working Papers 2002-11, Rice University, Department of Economics.
- Chateauneuf, Alain & Cohen, Michele & Meilijson, Isaac, 2004.
"Four notions of mean-preserving increase in risk, risk attitudes and applications to the rank-dependent expected utility model,"
Journal of Mathematical Economics,
Elsevier, vol. 40(5), pages 547-571, August.
- Alain Chateauneuf & Michèle Cohen & Isaac Meilijson, 2004. "Four notions of mean preserving increase in risk, risk attitudes and applications to the Rank-Dependent Expected Utility model," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00212281, HAL.
- repec:hal:journl:halshs-00212281 is not listed on IDEAS
- Kihlstrom, Richard E. & Mirman, Leonard J., 1974. "Risk aversion with many commodities," Journal of Economic Theory, Elsevier, vol. 8(3), pages 361-388, July.
- Keeney,Ralph L. & Raiffa,Howard, 1993. "Decisions with Multiple Objectives," Cambridge Books, Cambridge University Press, number 9780521438834, October.
- Klibanoff, Peter & Marinacci, Massimo & Mukerji, Sujoy, 2009.
"Recursive smooth ambiguity preferences,"
Journal of Economic Theory,
Elsevier, vol. 144(3), pages 930-976, May.
- Yaari, Menahem E., 1969. "Some remarks on measures of risk aversion and on their uses," Journal of Economic Theory, Elsevier, vol. 1(3), pages 315-329, October.
- repec:dau:papers:123456789/4434 is not listed on IDEAS
- Ana Cecília Fieler, 2011. "Nonhomotheticity and Bilateral Trade: Evidence and a Quantitative Explanation," Econometrica, Econometric Society, vol. 79(4), pages 1069-1101, 07.
When requesting a correction, please mention this item's handle: RePEc:stz:wpaper:eth-rc-13-002. 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: (Claudio J. Tessone)
If references are entirely missing, you can add them using this form.