Intertemporal substitution and recursive smooth ambiguity preferences
Date
2011-09
DOI
Authors
Hayashi, Takashi
Miao, Jianjun
Version
Published version
OA Version
Citation
T. Hayashi, J. Miao. 2011. "Intertemporal substitution and recursive smooth ambiguity preferences" Theoretical Economics, Volume 6, Issue 3, pp.423-472. https://doi.org/10.3982/te843
Abstract
In this paper, we establish an axiomatically founded generalized recursive smooth ambiguity model that allows for a separation among intertemporal substitution, risk aversion, and ambiguity aversion. We axiomatize this model using two approaches: the second-order act approach à la Klibanoff, Marinacci, and Mukerji (2005) and the two-stage randomization approach à la Seo (2009). We characterize risk attitude and ambiguity attitude within these two approaches. We then discuss our model's application in asset pricing. Our recursive preference model nests some popular models in the literature as special cases.
Description
License
Copyright © 2011 Takashi Hayashi and Jianjun Miao. Licensed under the Creative Commons Attribution-NonCommercial License 3.0. Available at http://econtheory.org