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2017-08-09Diskussionspapier DOI: 10.18452/18719
Generalized Entropy and Model Uncertainty
dc.contributor.authorMeyer-Gohde, Alexander
dc.date.accessioned2018-01-15T15:34:54Z
dc.date.available2018-01-15T15:34:54Z
dc.date.issued2017-08-09
dc.identifier.urihttp://edoc.hu-berlin.de/18452/19430
dc.description.abstractI entertain a generalization of the standard Bolzmann-Gibbs-Shannon measure of entropy in multiplier preferences of model uncertainty. Using this measure, I derive a generalized exponential certainty equivalent, which nests the exponential certainty equivalent of the standard Hansen-Sargent model uncertainty formulation and the power certainty equivalent of the popular Epstein-Zin-Weil recursive preferences as special cases. Besides providing a model uncertainty rationale to these risk-sensitive preferences, the generalized exponential equivalent provides additional flexibility in modeling uncertainty through its introduction of pessimism into agents, causing them to overweight events made more likely in the worst case model when forming expectations. In a standard neoclassical growth model, I close the gap to the Hansen-Jagannathan bounds with plausible detection error probabilities using the generalized exponential equivalent and show that Hansen-Sargent and Epstein-Zin-Weil preferences yield comparable market prices of risk for given detection error probabilities.eng
dc.language.isoeng
dc.publisherHumboldt-Universität zu Berlin
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/
dc.subjectmodel uncertaintyeng
dc.subjectrobust controleng
dc.subjectrecursive preferenceseng
dc.subjectequity premium puzzleeng
dc.subjectTsallis entropyeng
dc.subject.ddc330 Wirtschaft
dc.titleGeneralized Entropy and Model Uncertainty
dc.typeworkingPaper
dc.identifier.urnurn:nbn:de:kobv:11-110-18452/19430-9
dc.identifier.doihttp://dx.doi.org/10.18452/18719
local.edoc.container-titleSonderforschungsbereich 649: Ökonomisches Risiko
local.edoc.pages38
local.edoc.type-nameDiskussionspapier
local.edoc.institutionWirtschaftswissenschaftliche Fakultät
local.edoc.container-typeseries
local.edoc.container-type-nameSchriftenreihe
local.edoc.container-volume2017
local.edoc.container-issue17
local.edoc.container-erstkatid2195055-6

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