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Recursive utility using the stochastic maximum principle

Aase, Knut K. - In: Quantitative Economics 7 (2016) 3, pp. 859-887

rate and risk premiums using recursive utility in a continuous-time model. We use the stochastic maximum principle to … Markovian, which can be the case with recursive utility. With existence granted, the wealth portfolio is characterized in … equilibrium in terms of utility and aggregate consumption. The equilibrium real interest rate is derived, and the resulting model …

Persistent link: https://www.econbiz.de/10011995477

Optimal growth and impatience : a phase diagram analysis

Chang, Fwu-Ranq - 2004

In this paper we show that we can replace the assumption of constant discount rate in the onesector optimal growth model with the assumption of decreasing marginal impatience without losing major properties of the model. In particular, we show that the steady state exists, is unique, and has a...

Persistent link: https://www.econbiz.de/10010261104

World Equity Premium based Risk Aversion Estimates

Pozzi, L.C.G.; de Vries, C.G.; Zenhorst, J. - 2010

CAPM under power utility is excessively high. Moreover, estimates in the literature vary considerably across countries. We …

Persistent link: https://www.econbiz.de/10010325953

Asset pricing, habit memory, and the labor market

Jaccard, Ivan - 2010

This article studies the asset pricing and the business cycle implications of habit formation in a production economy with capital adjustment costs and endogenous labor supply. A specification of internal habit in the mix of consumption and leisure which minimizes the wealth effect on labor...

Persistent link: https://www.econbiz.de/10011605209

A Robust Approach to Risk Aversion

Bommier, Antoine; Le Grand, François - 2013

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...

Persistent link: https://www.econbiz.de/10011753236

Foundations of continuous-time recrusive utility: Differentiability and normalization of certainty equivalents

Kraft, Holger; Seifried, Frank Thomas - 2009

This paper relates recursive utility in continuous time to its discrete-time origins and provides a rigorous and … intuitive alternative to a heuristic approach presented in [Duffie, Epstein 1992], who formally define recursive utility in … continuous time via backward stochastic differential equations (stochastic differential utility). Furthermore, we show that the …

Persistent link: https://www.econbiz.de/10010271454

Model misspecification, the equilibrium natural interest rate and the equity premium

Tristani, Oreste - 2007

This paper analyses the determinants of the natural rate of interest in a non-linear model where agents are uncertain over both future technology growth and the future course of monetary policy. I show that the real natural rate can be affected by sizable uncertainty premia, including premia...

Persistent link: https://www.econbiz.de/10011604854

Consumption based capital asset pricing and the Austrian Stock Exchange

Böheim, René; Boss, Michael - 1996

Using data from the Vienna Stock Exchange we investigate three different types of consumption based capital asset pricing models: the well known two state model of Mehra and Prescott, the model of Rietz, which includes also a crash state, and an own four state model. The aim of this Vienna Stock...

Persistent link: https://www.econbiz.de/10010291074

Psychophysical interpretation for utility measures

He, Yuqing - In: Economics: The Open-Access, Open-Assessment E-Journal 6 (2012) 2012-29, pp. 1-35

The paper explores utility measures by combining experiments with mathematical derivations in the psychophysics … paradigm. The analysis on the ultimatum game experiment reveals evidences for the utility threshold and thus supports Bernoulli …'s utility logarithmic law. Both experimental results and theoretical derivations show that the logarithmic law is suitable for …

Persistent link: https://www.econbiz.de/10010309604

Valuation risk revalued

De Groot, Oliver; Richter, Alexander W.; Throckmorton, … - In: Quantitative Economics 13 (2022) 2, pp. 723-759

This paper shows the success of valuation risk-time-preference shocks in Epstein-Zin utility-in resolving asset pricing …

Persistent link: https://www.econbiz.de/10014537031