A Dynamic Quantile Model for Distinguishing Intertemporal Substitution from Risk Aversion

2020 ◽  
Author(s):  
Luciano I. de Castro ◽  
Lance Cundy ◽  
Antonio F. Galvao ◽  
Rafael Vieira Westenberger
Keyword(s):  
Risk Aversion ◽  
Intertemporal Substitution

Disentangling Intertemporal Substitution and Risk Aversion Under the Expected Utility Theorem

2018 ◽  
Vol 19 (2) ◽  
Author(s):  
C. Oscar Lau
Keyword(s):  
Risk Aversion ◽  
Expected Utility ◽  
Axiomatic Approach ◽  
Intertemporal Substitution ◽  
Standard Time ◽  
Separable Form ◽  
Straightforward Extension

Abstract This paper presents an axiomatic approach to separately control for the attitudes toward intertemporal substitution and risk aversion under the expected utility theorem. The standard time-separable form is recovered only if the functions dictating the two attitudes are identical. Risk aversion is defined on consumption amount rather than on utility (as in Kihlstrom and Mirman (1974 and 1981)). Moreover, the agent is allowed to trade his lottery outcome to optimize his consumption. As a result, this approach provides a straightforward extension of the familiar Arrow-Pratt results to multiple periods. These include categorizing, measuring, and comparing risk aversions.

scholarly journals Risk aversion, intertemporal substitution, and the term structure of interest rates

2011 ◽  
Vol 27 (6) ◽  
pp. 1013-1036 ◽  
Author(s):  
René Garcia ◽  
Richard Luger
Keyword(s):  
Risk Aversion ◽  
Interest Rates ◽  
Term Structure ◽  
Intertemporal Substitution

Risk Aversion Versus Intertemporal Substitution

2001 ◽  
Vol 19 (4) ◽  
pp. 395-403 ◽  
Author(s):  
Christopher J Neely ◽  
Amlan Roy ◽  
Charles H Whiteman
Keyword(s):  
Risk Aversion ◽  
Intertemporal Substitution

Prescriptivism, Risk Aversion, and Intertemporal Substitution in Climate Economics

2018 ◽  
Author(s):  
J. Paul Kelleher ◽  
Gernot Wagner
Keyword(s):  
Risk Aversion ◽  
Intertemporal Substitution ◽  
Climate Economics

Stock-Market Participation, Intertemporal Substitution, and Risk-Aversion

2003 ◽  
Vol 93 (2) ◽  
pp. 383-391 ◽  
Author(s):  
Annette Vissing-Jørgensen ◽  
Orazio P Attanasio
Keyword(s):  
Stock Market ◽  
Risk Aversion ◽  
Market Participation ◽  
Intertemporal Substitution ◽  
Stock Market Participation

Risk Premiums versus Waiting-Options Premiums: A Simple Numerical Example

2009 ◽  
Vol 9 (1) ◽  
Author(s):  
Kenji Miyazaki ◽  
Makoto Saito
Keyword(s):  
Risk Aversion ◽  
Interest Rates ◽  
Excess Returns ◽  
Intertemporal Substitution ◽  
Informative Signal ◽  
Risky Assets ◽  
Risk Premiums ◽  
Numerical Examples ◽  
Numerical Example ◽  
New Information

This paper investigates how interest rates on liquid assets and excess returns on risky assets are determined when only safe assets can be used as liquid assets when waiting for an informative signal of future payoffs. In particular, we carefully differentiate between a demand for liquid assets while waiting for new information and a demand for safe assets for precautionary reasons. Employing Kreps--Porteus preferences, numerical examples demonstrate that larger waiting-options premiums (lower interest rates) emerge with higher risk aversion in combination with more elastic intertemporal substitution.

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