Characterizing and Comparing Intrinsic Risk Attitude

The present paper introduces a novel idea of what constitutes risk attitude, how we can represent it, and how we can compare risk attitude across agents with differing tastes. In contrast to the Arrow--Pratt measure, it links directly to preferences on the multidimensional consumption space and is independent of the way in which we measure consumption. The paper derives a corresponding preference representation and applied insights governing Epstein-Zin preferences and asset pricing models. In particular, it suggests why the popular long-run risk model finds estimates of the elasticity of intertemporal substitution constrasting sharply with the rest of macroeconomics