A Robust Approach to Risk Aversion

Antoine Bommier and Francois Le Grand

Working Papers from ETH Zurich, Chair of Systems Design

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 of risk aversion in recursive problems. We also provide applications, in which we discuss the impact of risk aversion on asset pricing and risk sharing.

Keywords: risk aversion; recursive utility; robustness; ordinal dominance; risk free rate; equity premium; risk sharing. JEL codes: E2; E43; E44. (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
ftp://web.sg.ethz.ch/RePEc/stz/wpaper/pdf/ETH-RC-13-002.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Failed to connect to FTP server web.sg.ethz.ch: A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.

Related works:
Working Paper: A Robust Approach to Risk Aversion (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:stz:wpaper:eth-rc-13-002

Access Statistics for this paper

More papers in Working Papers from ETH Zurich, Chair of Systems Design Contact information at EDIRC.
Bibliographic data for series maintained by Claudio J. Tessone ( this e-mail address is bad, please contact ).