Recursive Utility Under Uncertainty

Chew, Soo Hong; Epstein, Larry G.

doi:10.1007/978-3-662-07071-0_18

Cited by 38 publications

(34 citation statements)

References 14 publications

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“…For the case of risky consumption processes, that is, where objects of choice are suitably defined lotteries (probability measures), recursive models are axiomatized in [8,10,24]. Skiadas [30] axiomatizes recursive utility when the domain consists of consumption processes, or Savage-style acts, rather than lotteries.…”

Section: Related Literaturementioning

confidence: 99%

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Recursive multiple-priors

Epstein

Schneider²

2003

Journal of Economic Theory

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705

727

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This paper axiomatizes an intertemporal version of multiple-priors utility. A central axiom is dynamic consistency, which leads to a recursive structure for utility, to 'rectangular' sets of priors and to prior-by-prior Bayesian updating as the updating rule for such sets of priors. It is argued that dynamic consistency is intuitive in a wide range of situations and that the model is consistent with a rich set of possibilities for dynamic behavior under ambiguity. r

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Section: Related Literaturementioning

confidence: 99%

“…An important feature of rectangularity is that it implies that P is uniquely determined by the process of conditional one-step-ahead correspondences P þ1 t : More precisely, begin with an arbitrary set of correspondences 8 …”

Section: Rectangularitymentioning

confidence: 99%

Recursive multiple-priors

Epstein

Schneider²

2003

Journal of Economic Theory

Self Cite

705

727

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“…When the parameter β is large, the agent puts more weight on the future and less weight on the present, in accordance with the impatience interpretation of this parameter. The preferences represented by (9) have axiomatic underpinnings (e.g., Chew and Epstein (1991)). …”

Section: Application Of the Standard Aggregatormentioning

confidence: 99%

“…That the richer structure of the recursive model is a modest extension is demonstrated by the interpretations and plausible results yielded in the simple expressions (18) and (19). The model is based on fundamental assumptions and axioms of rational behavior (Chew and Epstein (1991)). …”

mentioning

confidence: 92%

Recursive Utility and the Equity Premium Puzzle: A Discrete-Time Approach

Aase

2013

SSRN Journal

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“…Interpreting the risky asset R as the value weighted market portfolio M corresponding to the S&P-500 index, equations (13) and (14) are two equations in two unknowns that can provide estimates of the two preference 2 There are of course newer data by now, but these retain the same basic features. If our model can explain the data in Table 1, it can explain any of the newer sets as well.…”

Section: The Equilibrium Risk Premium and The Short-term Interest Ratementioning

confidence: 99%

Beyond the Local Mean-Variance Analysis in Continuous Time: The Problem of Non-Normality

Aase

Lillestøl

2015

SSRN Journal

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The paper investigates the effects of deviations from normality on the estimates of risk premiums and the real equilibrium, short-term interest rate in the conventional rational expectations equilibrium model of Lucas (1978). We consider a time-continuous approach, where both the aggregate consumption process as well as cumulative dividends from risky assets are assumed to be jump-diffusion processes. This approach allows for random jumps in the fundamental underlying processes at random time points. Preferences are time separable and additive. We derive testable expressions for these quantities, and confront these with 20. century sample estimates. Since there are non-linear components in the formulas for the risk premiums and the interest rate, we can readily explore what effect deviation from normality has on these quantities. Our results test the boundaries of the conventional model.

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Recursive Utility Under Uncertainty

Cited by 38 publications

References 14 publications

Recursive multiple-priors

Recursive multiple-priors

Recursive Utility and the Equity Premium Puzzle: A Discrete-Time Approach

Beyond the Local Mean-Variance Analysis in Continuous Time: The Problem of Non-Normality

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