Smooth Ambiguity Aversion toward Small Risks and Continuous-Time Recursive Utility

• 成果类型: Article
• 署名作者: Skiadas, Costis
• 署名单位: Northwestern University
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/671179
• 发表日期: 2013
• 页码: 775-792
• 关键词: Stochastic differential utility; asset returns; expected utility; equity premium; ROBUST-CONTROL; uncertainty; consumption; preferences; puzzle; MODEL

摘要

Assuming Brownian/Poisson uncertainty, a certainty equivalent ((CE)) based on the smooth second-order expected utility of Klibanoff, Marinacci, and Mukerji is shown to be approximately equal to an expected-utility CE. As a consequence, the corresponding continuous-time recursive utility form is the same as for Kreps-Porteus utility. The analogous conclusions are drawn for a smooth divergence CE, based on a formulation of Maccheroni, Marinacci, and Rustichini, but only under Brownian uncertainty. Under Poisson uncertainty, a smooth divergence CE can be approximated with an expected-utility CE if and only if it is of the entropic type. A nonentropic divergence CE results in a new class of continuous-time recursive utilities that price Brownian and Poissonian risks differently.