Hayashi, Takashi; Miao, Jianjun Intertemporal substitution and recursive smooth ambiguity preferences. (English) Zbl 1278.91043 Theor. Econ. 6, No. 3, 423-472 (2011). Summary: We establish an axiomatically founded generalized recursive smooth ambiguity model that allows for a separation among intertemporal substitution, risk aversion, and ambiguity aversion. We axiomatize this model using two approaches: the second-order act approach à la P. Klibanoff et al. [Econometrica 73, No. 6, 1849–1892 (2005; Zbl 1151.91372)] and the two-stage randomization approach à la K. Seo [Econometrica 77, No. 5, 1575–1605 (2009; Zbl 1178.91053)]. We characterize risk attitude and ambiguity attitude within these two approaches. We then discuss our model’s application in asset pricing. Our recursive preference model nests some popular models in the literature as special cases. Cited in 16 Documents MSC: 91B08 Individual preferences 91B16 Utility theory Keywords:ambiguity; ambiguity aversion; risk aversion; intertemporal substitution; model uncertainty; recursive utility; dynamic consistency Citations:Zbl 1151.91372; Zbl 1178.91053 PDFBibTeX XMLCite \textit{T. Hayashi} and \textit{J. Miao}, Theor. Econ. 6, No. 3, 423--472 (2011; Zbl 1278.91043) Full Text: DOI