000172742 001__ 172742
000172742 005__ 20181203022603.0
000172742 0247_ $$2doi$$a10.1013/rfs/hhp106
000172742 02470 $$2ISI$$a000276553800001
000172742 037__ $$aARTICLE
000172742 245__ $$aAmbiguity in Asset Markets: Theory and Experiment
000172742 269__ $$a2010
000172742 260__ $$c2010
000172742 336__ $$aJournal Articles
000172742 520__ $$aThis paper studies the impact of ambiguity and ambiguity aversion on equilibrium asset prices and portfolio holdings in competitive financial markets. It argues that attitudes toward ambiguity are heterogeneous across the population, just as attitudes toward risk are heterogeneous across the population, but that heterogeneity of attitudes toward ambiguity has different implications than heterogeneity of attitudes toward risk. In particular, when some state probabilities are not known, agents who are sufficiently ambiguity averse find open sets of prices for which they refuse to hold an ambiguous portfolio. This suggests a different cross section of portfolio choices, a wider range of state price/probability ratios, and different rankings of state price/probability ratios than would be predicted if state probabilities were known. Experiments confirm all of these suggestions. Our findings contradict the claim that investors who have cognitive biases do not affect prices because they are inframarginal: ambiguity-averse investors have an indirect effect on prices because they change the per capita amount of risk that is to be shared among the marginal investors. Our experimental data also suggest a positive correlation between risk aversion and ambiguity aversion that might explain the "value effect" in historical data. (JEL G11, G12, C92, D53)
000172742 6531_ $$aDecision-Making
000172742 6531_ $$aPrices
000172742 6531_ $$aUncertainty
000172742 6531_ $$aGrowth
000172742 6531_ $$aModel
000172742 700__ $$0241931$$g181386$$uCALTECH, Ecole Polytech Fed Lausanne, Pasadena, CA 91125 USA$$aBossaerts, Peter
000172742 700__ $$uUniv Turin, DSMA, I-10124 Turin, Italy$$aGhirardato, Paolo
000172742 700__ $$aGuarnaschelli, Serena
000172742 700__ $$aZame, William R.$$uUniv Calif Los Angeles, Los Angeles, CA USA
000172742 773__ $$j23$$tReview Of Financial Studies$$q1325-1359
000172742 909C0 $$xU11813$$0252272$$pSFI-PB
000172742 909CO $$pCDM$$particle$$ooai:infoscience.tind.io:172742
000172742 937__ $$aEPFL-ARTICLE-172742
000172742 973__ $$rREVIEWED$$sPUBLISHED$$aEPFL
000172742 980__ $$aARTICLE