Asset Pricing Implications of A Non-Expected Recursive Utility Function: A Review

17 Pages Posted: 25 Oct 1999 Last revised: 29 Nov 2015

See all articles by Jaeho Cho

Jaeho Cho

CUNY Baruch College

Jack Clark Francis

Zicklin School of Business, Baruch College

Date Written: February 9, 1994

Abstract

Employing a recently developed non-expected recursive utility function in which intertemporal substitution and risk aversion are disentangled, this paper reviews general equilibrium asset pricing in a pure exchange representative consumer economy. Assuming that the growth rates of aggregate dividends are independently and identically distributed over time, closed-form formulas for stock and bond prices (and returns) and equity premium are derived. Using these formulas, various issues in asset pricing, including the respective roles played by the two disparate preference components: intertemporal substitution and risk aversion, are discussed.

JEL Classification: G12

Suggested Citation

Cho, Jaeho and Francis, Jack Clark, Asset Pricing Implications of A Non-Expected Recursive Utility Function: A Review (February 9, 1994). International Review of Financial Analysis Volume 3, Number 1, 1994, Available at SSRN: https://ssrn.com/abstract=5376

Jaeho Cho

CUNY Baruch College

17 Lexington Avenue
New York, NY 10021
United States

Jack Clark Francis (Contact Author)

Zicklin School of Business, Baruch College ( email )

One Bernard Baruch Way
New York, NY 10010
United States
646-312-3462 (Phone)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
29
Abstract Views
919
PlumX Metrics