The Golden Gate Bridge in a pale blue treatment

Archived UC Berkeley lecture series · 2007

Intertemporal Risk Attitude

Risk aversion, intertemporal substitution, recursive utility, stationarity, and discounting.

Overview

The lecture combines the von Neumann-Morgenstern axioms with additive separability on certain consumption paths. The resulting framework permits a notion of multi-commodity risk aversion that is independent of the good being evaluated and its measurement scale.

It relates this framework to Epstein and Zin's recursive one-commodity model, separates Arrow-Pratt risk aversion from intertemporal substitutability, and examines preferences over the timing of risk resolution and their implications for discounting.

Introductory seminar
ARE Departmental Seminar, 7 September 2007
Regular lecture
Began 12 September 2007; the series has concluded
Structure
Eight lectures in two four-lecture blocks

Lecture content and handouts

Lecture notes available upon request.

Introductory seminar slides Underlying paper: Intertemporal Risk Aversion, Stationarity and Discounting
  1. 1Atemporal Uncertainty RevisitedHandout
  2. 2A Simplified Two-Period ModelHandout
    Motivating example
  3. 3Epstein-Zin Preferences and Measurement-Scale DependenceHandout
  4. 4Intertemporal Risk AversionHandout
    Collected lecture notes 1–4
  5. 5The General ModelSlides
  6. 6The Isoelastic ModelSlides
  7. 7A Preference for the Timing of Risk ResolutionSlides
  8. 8Stationarity and DiscountingSlides

The first four lectures introduce the separation of risk aversion and intertemporal substitutability in a simplified two-period framework. Lectures five through eight develop the general model and tractable axiomatic special cases.