Corpus ID: 12877959

Ambiguity in Asset Markets : Theory and Experiment 1

@inproceedings{Bossaerts2009AmbiguityIA,
  title={Ambiguity in Asset Markets : Theory and Experiment 1},
  author={Peter Bossaerts and Paolo Ghirardato and Serena Guarnaschelli and William R. Zame},
  year={2009}
}
This 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… Expand
Portfolio management with stochastic interest rates and inflation ambiguity
We solve, in closed form, a stock-bond-cash portfolio problem of a risk- and ambiguity-averse investor when interest rates and the inflation rate are stochastic. The expected inflation rate isExpand
Ambiguity aversion and optimal derivative-based pension investment with stochastic income and volatility
Abstract This paper provides a derivative-based optimal investment strategy for an ambiguity-adverse pension investor who faces not only risks from time-varying income and market return volatilityExpand
Ambiguity Aversion in Ellsberg Frameworks
We study optimal portfolio choice and equilibrium asset prices induced by alpha-maxmin expected utility (alpha-MEU) models. In the standard Ellsberg framework we prove that alpha-MEU preferences areExpand
Risk Premia and Knightian Uncertainty in an Experimental Market Featuring a Long-Lived Asset
Objectives: I examine risk premia and the influence of Knightian uncertainty in a laboratory market featuring a long-lived asset. Methods: I employ an experimental asset market, utilizing featuresExpand
A Theoretical Foundation of Ambiguity Measurement
Ordering alternatives by their degree of ambiguity is crucial in economic and financial decision-making processes. To quantify the degree of ambiguity, this paper introduces anExpand
Robust Portfolio Choice with Derivatives Trading Under Stochastic Volatility
The problem of optimal portfolio choice is solved, in closed form, for an ambiguity averse investor who has access to stock and derivatives markets. The investor can have different levels ofExpand
Robust Equilibrium Excess-of-Loss Reinsurance and CDS Investment Strategies for a Mean-Variance Insurer with Ambiguity Aversion
This paper considers the robust equilibrium reinsurance and investment strategies for an ambiguity-averse insurer under a dynamic mean-variance criterion. The insurer is allowed to purchaseExpand
Ambiguity attitudes and social interactions: An experimental investigation
This paper reports the results of experiments testing prevalence of non-neutral ambiguity attitudes and how these attitudes change as a result of interpersonal interactions. To address the firstExpand
Behavioral Finance
Behavioral finance studies the application of psychology to finance, with a focus on individual-level cognitive biases. I describe here the sources of judgment and decision biases, how they affectExpand
Ambiguity and Overconfidence
There are two phenomena in behavioral finance and economics which are seemingly unrelated and have been studied separately; overconfidence and ambiguity aversion. In this paper we are trying to linkExpand
...
1
2
...

References

SHOWING 1-10 OF 26 REFERENCES
Learning and Asset Prices under Ambiguous Information
We propose a new modeling framework to study the asset pricing implications of learning under ambiguity aversion. In a continuous time partial information Lucas economy, we characterize analyticallyExpand
Ambiguity, uncertainty aversion and equilibrium welfare
Summary.In order to analyse the effect of ambiguity and uncertainty aversion on equilibrium welfare, a two period, pure exchange one good economy is considered. Agents are Choquet-expected-utilityExpand
Estimating Ambiguity Aversion in a Portfolio Choice Experiment
We report a laboratory experiment that enables us to estimate parametric models of ambiguity aversion at the level of the individual subject. We use two main specifications, a “kinked” specificationExpand
Ambiguity and Nonparticipation: The Role of Regulation
We investigate the implications of ambiguity aversion for performance and regulation of markets. In our model, agents' decision making may incorporate both risk and ambiguity, and we demonstrate thatExpand
Basic Principles of Asset Pricing Theory: Evidence From Large-Scale Experimental Financial Markets
We report on two sets of large-scale financial markets experiments that were designed to test the central proposition of modern asset pricing theory, namely, that risk premia are solely determined byExpand
Consensus Consumer and Intertemporal Asset Pricing with Heterogeneous Beliefs
The aim of this paper is to analyse the impact of heterogeneous beliefs in an otherwise standard competitive complete market economy. The construction of a consensus probability belief, as well as aExpand
INTERTEMPORAL ASSET PRICING UNDER KNIGHTIAN UNCERTAINTY
In conformity with the Savage model of decision-making, modern asset pricing theory assumes that agents' beliefs about the likelihoods of future states of the world may be represented by aExpand
Evaluation Periods and Asset Prices in a Market Experiment
We test whether the frequency of feedback information about the performance of an investment portfolio and the flexibility with which the investor can change the portfolio influence her risk attitudeExpand
Robust Portfolio Rules and Asset Pricing
I present a new approach to the dynamic portfolio and consumption problem of an investor who worries about model uncertainty (in addition to market risk) and seeks robust decisions along the lines ofExpand
Aggregation of Heterogenous Beliefs and Asset Pricing in Complete Financial Markets
We propose a method to aggregate heterogenous individual beliefs, given a competitive equilibrium in complete asset markets, into a single \market probability" such that it generates, if commonlyExpand
...
1
2
3
...