Anmerkungen:
In: Journal of Finance, Forthcoming
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments September 4, 2019 erstellt
Beschreibung:
We obtain exact necessary and sufficient conditions for existence and uniqueness of solutions of a class of homothetic recursive utility models postulated by Epstein and Zin (1989). The conditions center on a single test value with a natural economic interpretation. The test sheds light on the relationship between valuation of cash flows, impatience, risk adjustment and intertemporal substitution of consumption. We propose two methods to compute the test value when an analytical solution is not available. Several applications are provided