Power Risk Aversion Utility Functions

Danyang Xie

Annals of Economics and Finance, 2000, vol. 1, issue 2, 265-282

Abstract: This paper introduces a new class of utility functions---the power risk aversion. It is shown that the CRRA and CARA utility functions are both in this class. The implications of the PRA utility functions are explored in the context of growth theory. In particular, it is found that economies facing a common real interest rate do not necessarily grow at the same rates if they start with different levels of capital stock. Thus diversity in growth performance across countries occurs even if these countries have access to perfect international capital markets. Potential applications of the PRA in asset pricing are considered.

Keywords: PRA utility functions; Growth; Asset pricing (search for similar items in EconPapers)
JEL-codes: C60 E21 O41 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (23)

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Related works:
Working Paper: Power Risk Aversion Utility Functions (2002)
Working Paper: Power Risk Aversion Utility Functions (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2000:v:1:i:2:p:265-282

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