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| {{Use dmy dates|date=July 2012}}
| | Wilber Berryhill is what his wife enjoys to call him [http://www.indosfriends.com/profile-253/info/ tarot readings] and [https://www-ocl.gist.ac.kr/work/xe/?document_srl=605236 real psychics] he completely enjoys this title. Office supervising is where my main earnings arrives from but I've always needed my personal company. Some time ago she selected to live in Alaska and her mothers and fathers reside close by. To play lacross is some thing I really appreciate doing.<br><br>Also visit my web site: [http://www.herandkingscounty.com/content/information-and-facts-you-must-know-about-hobbies free psychic readings] |
| In economics, '''Epstein–Zin preferences''' refers to a specification of recursive [[utility]].
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| A recursive utility function can be constructed from two components: a time aggregator that characterizes preferences in the absence of uncertainty and a risk aggregator that defines the certainty equivalent function that characterizes preferences over static gambles and is used to aggregate the risk associated with future utility. With Epstein–Zin preferences, the time aggregator is a linearly homogenous [[CES aggregate]] of current consumption and the certainty equivalent of future utility. Specifically, the date-t utility index, <math>U_t</math>, for a sequence of positive scalar consumptions <math>\{c_t, c_{t+1}, c_{t+2}, ...\}</math>, that are potentially stochastic for time periods beyond date t, is defined recursively as the solution to the nonlinear stochastic difference equation
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| :<math>
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| U_t = [ (1-\beta) c_t^\rho + \beta \mu_t(U_{t+1})^\rho ]^{1/\rho} ,
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| </math>
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| where <math>\mu_t( )</math> is a real-valued certainty equivalent operator. The parameter <math>0<\beta<1</math> determines the marginal rate of time preference, <math>1/\beta -1</math>, and the parameter <math>\rho<1</math> determines the elasticity of intertemporal substitution, <math>1/(1-\rho)</math>. Epstein and Zin considered a variety of certainty equivalent operators, but a popular choice for both theoretical and empirical research has been <math>\mu_t(U_{t+1})=[E_t U_{t+1}^\alpha]^{1/\alpha}</math>, where <math>E_t</math> denotes the expected value of probability distribution of <math>U_{t+1}</math>, conditional on information available to the planner in date t. The parameter <math>\alpha < 1</math> encodes risk aversion, with smaller values of <math>\alpha</math> implying a stronger aversion to risk. The parameter restriction <math>\alpha=\rho</math> results in a time-additive [[Von Neumann–Morgenstern utility theorem|von Neumann–Morgenstern]] expected utility index.
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| ==References==
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| * {{cite journal |title=Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework |last=Epstein |first=Larry G. |authorlink2=Stan Zin |last2=Zin |first2=Stanley E. |journal=[[Econometrica]] |volume=57 |issue=4 |year=1989 |pages=937–969 |doi= |jstor=1913778 }}
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| * {{cite book |chapter=Recursive Preferences |last=Backus |first=David K. |last2=Routledge |first2=Bryan R. |last3=Zin |first3=Stanley E. |title=[[The New Palgrave Dictionary of Economics]] |edition=Second |editor1-first=Steven N. |editor1-last=Durlauf |editor2-first=Lawrence E. |editor2-last=Blume |publisher=Palgrave Macmillan |year=2008 |chapterurl=http://www.dictionaryofeconomics.com/article?id=pde2008_R000260 }}
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| {{DEFAULTSORT:Epstein-Zin preferences}}
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| [[Category:Microeconomics]]
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| [[Category:Consumer theory]]
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| {{microeconomics-stub}}
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