
Open access
Date
2013-05Type
- Working Paper
ETH Bibliography
yes
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Abstract
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 ofrisk aversion in recursive problems. We also provide applications, in which we discuss the impact of risk aversion on asset pricing and risk sharing. Show more
Permanent link
https://doi.org/10.3929/ethz-a-007606199Publication status
publishedJournal / series
Economics Working Paper SeriesVolume
Publisher
ETH Zurich, Center of Economic Research (CER-ETH)Subject
Risk aversion; Recursive utility; Robustness; Risk-sensitive preferences; Ordinal dominace; Risk free rate; Equity premium; Risk sharingOrganisational unit
02045 - Dep. Geistes-, Sozial- u. Staatswiss. / Dep. of Humanities, Social and Pol.Sc.
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ETH Bibliography
yes
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