Recursive utility and parameter uncertainty

• 成果类型: Article
• 署名作者: Al-Najjar, Nabil I.; Shmaya, Eran
• 署名单位: Northwestern University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2019.02.005
• 发表日期: 2019
• 页码: 274-288
• 关键词: Recursive utility; parameter uncertainty

摘要

We explore how the Epstein Zin utility captures an agent's sensitivity to parameter uncertainty. Our main result is a closed-form representation of the Epstein Zin utility for an i.i.d. consumption process with unknown parameter, as the discount factor approaches 1. Using this representation, and under the usual assumption about the relationship between risk aversion and the attitude towards time smoothing, we show that the agent is averse to parameter uncertainty. (C) 2019 Elsevier Inc. All rights reserved.