Power Risk Aversion Utility Functions

Danyang Xie

No 22, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

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)
Pages: 18 pages
Date: 1999-11, Revised 2000-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Published in Annals of Economics and Finance, Nov 2000, pages 265-282

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http://down.aefweb.net/WorkingPapers/w22.pdf Last version, 2000 (application/pdf)

Related works:
Working Paper: Power Risk Aversion Utility Functions (2002)
Journal Article: Power Risk Aversion Utility Functions (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:wpaper:22

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