Ambiguity attitudes in a large representative sample
Management Science , Volume 62 - Issue 5 p. 1363- 1380
Using a theorem showing that matching probabilities of ambiguous events can capture ambiguity attitudes, we introduce a tractable method for measuring ambiguity attitudes and apply it in a large representative sample. In addition to ambiguity aversion, we confirm an ambiguity component recently found in laboratory studies: a-insensitivity, the tendency to treat subjective likelihoods as 50-50, thus overweighting extreme events. Our ambiguity measurements are associated with real economic decisions; specifically, a-insensitivity is negatively related to stock market participation. Ambiguity aversion is also negatively related to stock market participation, but only for subjects who perceive stock returns as highly ambiguous.
|Ambiguity aversion, Knightian uncertainty, Nonexpected utility, Nonparticipation, Portfolio choice, Reference dependence, Stock market participation, Uncertainty|
|ERIM Top-Core Articles|
|Organisation||Erasmus School of Economics|
Dimmock, S.G, Kouwenberg, R.R.P, & Wakker, P.P. (2016). Ambiguity attitudes in a large representative sample. Management Science, 62(5), 1363–1380. doi:10.1287/mnsc.2015.2198