Risk Aversion, Intertemporal Elasticity of Substitution and Correlation Aversion

Abstract

Intertemporal correlation aversion is an intuitive concept indicating whether an individual prefers lotteries concerning consumption at different moments in time to be positively or negatively correlated.I show that the difference between the coefficient of relative risk aversion and the inverse of the intertemporal elasticity of substitution is related, in a simple way, to the index of intertemporal correlation aversion.