The exchange-correlation potentials v xc which are currently fashionable in density functional theory ͑DFT͒, such as those obtained from the local density approximation ͑LDA͒ or generalized gradient approximations ͑GGAs͒, all suffer from incorrect asymptotic behavior. In atomic calculations, this leads to substantial overestimations of both the static polarizability and the frequency dependence of this property. In the present paper, it is shown that the errors in atomic static dipole and quadrupole polarizabilities are reduced by almost an order of magnitude, if a recently proposed model potential with correct Coulombic long-range behavior is used. The frequency dependence is improved similarly. The model potential also removes the overestimation in molecular polarizabilities, leading to slight improvements for average molecular polarizabilities and their frequency dependence. For the polarizability anisotropy we find that the model potential results do not improve over the LDA and GGA results. Our method for calculating frequency-dependent molecular response properties within time-dependent DFT, which we described in more detail elsewhere, is summarized.

The generalized gradient-approximated ͑GGA͒ energy functionals used in density functional theory ͑DFT͒ provide accurate results for many different properties. However, one of their weaknesses lies in the fact that Van der Waals forces are not described. In spite of this, it is possible to obtain reliable long-range potential energy surfaces within DFT. In this paper, we use time-dependent density functional response theory to obtain the Van der Waals dispersion coefficients C 6 , C 7 , and C 8 ͑both isotropic and anisotropic͒. They are calculated from the multipole polarizabilities at imaginary frequencies of the two interacting molecules. Alternatively, one might use one of the recently-proposed Van der Waals energy functionals for well-separated systems, which provide fairly good approximations to our isotropic results. Results with the local density approximation ͑LDA͒, Becke-Perdew ͑BP͒ GGA and the Van Leeuwen-Baerends ͑LB94͒ exchange-correlation potentials are presented for the multipole polarizabilities and the dispersion coefficients of several rare gases, diatomics and the water molecule. The LB94 potential clearly performs best, due to its correct Coulombic asymptotic behavior, yielding results which are close to those obtained with many-body perturbation theory ͑MBPT͒. The LDA and BP results are systematically too high for the isotropic properties. This becomes progressively worse for the higher dispersion coefficients. The results for the relative anisotropies are quite satisfactory for all three potentials, however.