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Palestra Especial: Dynamic quantile models of rational behaviour - Luciano I. Castro Filho (2019)

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Published on May 22, 2019

Dynamic quantile models of rational behaviour (Colóquio Interdisciplinar)
Professor: Luciano Irineu de Castro Filho - IMPA

Resumo: I will describe a dynamic model of rational behavior under uncertainty, in which the agent maximizes the stream of the future τ-quantile utilities, for τ ∈ (0, 1). That is, the agent has a quantile utility preference instead of the standard expected utility. Quantile preferences have useful advantages, such as dynamic consistency, monotonicity, and allows the separation between risk aversion and elasticity of intertemporal substitution. Although quantiles do not share some of the helpful properties of expectations, such as linearity and the law of iterated expectations, we are able to establish all the standard results in dynamic models. Namely, we show that the quantile preferences are dynamically consistent, the corresponding dynamic problem yields a value function, via a fixed point argument, establish its concavity and differentiability and show that the principle of optimality holds. Additionally, we derive the corresponding Euler equation, which is well suited for using well- known quantile regression methods for estimating and testing the economic model.

IMPA - Instituto Nacional de Matemática Pura e Aplicada ©
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