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Risk aversion in the expected and the nonexpected utility functions

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Abstract

If asset returns are i.i.d. over time, the preference parameter in the time additive von Neumann-Morgenstern expected utility is the risk aversion coefficient in the Epstein-Zin nonexpected utility. By distinguishing between risk aversion and intertemporal substitution, this article provides an explanation about the observed discrepancy in the empirical estimates of the risk aversion coefficient.

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Authors and Affiliations

  1. Department of Economics and Finance, Baruch College, the City University of New York, 17 Lexington Avenue, 10010, NY, NY

    Jaeho Cho

  2. 350 Barrows Hall, Walter A. Haas School of Business, University of California at Berkeley, 94720, Berkeley, CA

    Yoon Dokko

Authors
  1. Jaeho Cho
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  2. Yoon Dokko
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Cho, J., Dokko, Y. Risk aversion in the expected and the nonexpected utility functions. Rev Quant Finan Acc 3, 421–427 (1993). https://doi.org/10.1007/BF02409620

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  • DOI: https://doi.org/10.1007/BF02409620

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