Power Risk Aversion Utility Functions

Danyang Xie

International Finance from University Library of Munich, Germany

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: C60 E21 O41 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2002-08-22
New Economics Papers: this item is included in nep-dge and nep-mic
Note: Type of Document - Acrobat PDF; prepared on PC; to print on HP/PostScript/Franciscan monk; pages: 18; figures: Included
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/if/papers/0207/0207006.pdf (application/pdf)

Related works:
Journal Article: Power Risk Aversion Utility Functions (2000)
Working Paper: Power Risk Aversion Utility Functions (2000)
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:wpa:wuwpif:0207006

Access Statistics for this paper

More papers in International Finance from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).