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Power Risk Aversion Utility Functions

Danyang Xie

International Finance from EconWPA

Abstract: This paper introduces a new class of utility function -- 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: Power Risk Aversion; Growth; Asset Pricing (search for similar items in EconPapers)
JEL-codes: O41 E21 C60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mic
Date: 2002-08-22
Note: Type of Document - Acrobat PDF; prepared on PC; to print on HP/PostScript/Franciscan monk; pages: 18; figures: Included
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http://econwpa.repec.org/eps/if/papers/0207/0207006.pdf (application/pdf)

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Journal Article: Power Risk Aversion Utility Functions (2000) Downloads
Working Paper: Power Risk Aversion Utility Functions (2000) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpif:0207006

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