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
Management Science
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