Larry Epstein

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We provide a formal treatment of both static and dynamic portfolio choice using the Disappointment Aversion preferences of Gul (1991), which imply asymmetric aversion to gains versus losses. Our dynamic formulation nests the standard CRRA asset allocation problem as a special case. Using realistic data generating processes, we find reasonable equity(More)
I present a new approach to the dynamic portfolio and consumption problem of an investor who worries about model uncertainty (in addition to market risk) and seeks robust decisions along the lines of Anderson, Hansen and Sargent (2000). In accordance with maxmin expected utility a robust investor insures against some endogenous worstcase. I first show that(More)
The general restrictions on all economic primitives (i.e., (a) endowments, (b) preferences, and (c) asset return distributions) that yield the CAPM under the expected utility paradigm are provided. These results are then used to derive the class of restrictions on preferences and the distribution of asset returns alone that provides the CAPM. We also show(More)
Eight patients with severe arteriovenous malformations of the head and neck region have been treated by superselective embolization utilizing Ivalon and surgery. Six of those patients underwent surgical resection of the malformation following embolization with apparent lack of recurrence of the vascular tumor. The approach of superselective embolization is(More)
This paper takes a shrinkage approach to examine empirical implications of aversion to model uncertainty. The shrinkage approach explicitly shows how predictive distributions incorporate data and prior beliefs. It enables us to solve the optimal portfolio for uncertainty-averse investors. Aversion to uncertainty about the CAPM leads investors to hold a(More)
This paper presents an axiomatic foundation for recursive utility that captures the role of the timing of resolution of uncertainty without relying on exogenously speci®ed objective beliefs. Two main representation results are proved. In the ®rst one, future utility enters the recursion through the type of general aggregators considered in Skiadas (1997a),(More)
If a smooth demand function violates the strong axiom of revealed preference, the income and prices can follow a cycle and returm to their starting values even though real income is always rising. We show how real income growth along the “worst” revealed preference cycle depends on the range of price variation and on violations of the Slutsky conditions. We(More)