Expected utility functions are limited to second-order (conditional) risk aversion, while non-expected utility functions can exhibit either …rst-order or second-order (conditional) risk aversion. We extend the concept of orders of conditional risk aversion to orders of conditional dependent risk aversion. We show that …rst-order conditional dependent risk aversion is consistent with the framewo...

This paper considers the problem of optimal investment, consumption and life insurance acquisition for a wage earner who has CRRA (constant relative risk aversion) preferences. The market model is complete, continuous, the uncertainty is driven by Brownian motion and the stock price has mean reverting drift. The problem is solved by dynamic programming approach and the HJB equation is shown to ...

Simulation-and-regression methods have been recently proposed to solve multi-period, dynamic portfolio choice problems. In the constant relative risk aversion (CRRA) framework, the “value function recursion vs portfolio weight recursion” issue was previously examined in van Binsbergen and Brandt [24] and Garlappi and Skoulakis [14]. We revisit this issue in the context of an alternative simulat...

This work examines the validity of two main assumptions relative risk-aversion models educational inequality. We compare Breen-Goldthorpe (BG) and Breen-Yaish (BY) in terms their about status maintenance motives beliefs occupational risks associated with decisions. Concerning first assumption, our contribution is threefold. First, we criticise assumption BG model that families aim only at avoid...

Bargaining problems are considered where the preferences of the bargainers deviate from expected utility but can be modelled according to rank dependent utility theory. Under rank dependent utility both the utility function and the probability weighting function influence the risk attitude of a decision maker. The same definition of risk aversion leads to two forms of risk aversion: utility ris...

The constant relative risk aversion (CRRA) type utility functions are used in consumption-based capital asset pricing models (C-CAPM) and are estimated by the generalized method of moments (GMM). More realistic hyperbolic absolute risk aversion (HARA) utility functions are analytically inconvenient. We show how to estimate HARA-based CCAPM models by employing Godambe-Durbin \estimating function...

Agents with standard, time-separable preferences do not care about the temporal distribution of risk. This is a strong assumption. For example, it seems plausible that a consumer may …nd persistent shocks to consumption less desirable than uncorrelated ‡uctuations. Such a consumer is said to exhibit temporal risk aversion. This paper examines the implications of temporal risk aversion for asset...

We propose a consumption-based capital asset pricing model in which the representative agent’s preferences display state-dependent risk aversion. We obtain a valuation equation in which the vector of excess returns on equity includes both consumption risk as well as the risk associated with variations in preferences. We develop a simple model that can be estimated without specifying the functio...