Ambiguity aversion
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Ambiguity aversion and household portfolio choice puzzles: Empirical evidence Open
We test the relation between ambiguity aversion and five household portfolio choice puzzles: nonparticipation in equities, low allocations to equity, home-bias, own-company stock ownership, and portfolio under-diversification. In a represe…
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Testing Ambiguity Models through the Measurement of Probabilities for Gains and Losses Open
This paper reports on two experiments that test the descriptive validity of ambiguity models using a natural source of uncertainty (the evolution of stock indices) and both gains and losses. We observed violations of probabilistic sophisti…
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Frameworks and Results in Distributionally Robust Optimization Open
The concepts of risk aversion, chance-constrained optimization, and robust optimization have developed significantly over the last decade. The statistical learning community has also witnessed a rapid theoretical and applied growth by rely…
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Dragon Slaying with Ambiguity: Theory and Experiments Open
This paper studies the impact of ambiguity in the best‐shot and weakest‐link models of public good provision. The models are first analyzed theoretically. Then, we conduct experiments to study how ambiguity affects behavior in these games.…
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The Economics of the Climate Open
I review the economic characteristics of the climate problem, focusing on the choice of discount rates in the presence of a stock externality, risk and uncertainty/ambiguity, and the role of integrated assessment models (IAMs) in analyzing…
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The empirical relationship between nonstandard economic behaviors Open
Significance A large literature in behavioral and experimental economics has identified a long list of robust phenomena that are hard to explain within the classic model of economic choice. These are, however, typically analyzed independen…
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Communicating Scientific Uncertainty About the COVID-19 Pandemic: Online Experimental Study of an Uncertainty-Normalizing Strategy Open
Background Communicating scientific uncertainty about public health threats such as COVID-19 is an ethically desirable task endorsed by expert guidelines on crisis communication. However, the communication of scientific uncertainty is chal…
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Risk sensitivity as an evolutionary adaptation Open
Risk aversion is a common behavior universal to humans and animals alike. Economists have traditionally defined risk preferences by the curvature of the utility function. Psychologists and behavioral economists also make use of concepts su…
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Trust as a decision under ambiguity Open
Decisions to trust in strategic situations involve ambiguity (unknown probabilities). Despite many theoretical studies on ambiguity in game theory, empirical studies have lagged behind due to a lack of measurement methods, where separating…
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Decision-making in Multiple Sclerosis: The Role of Aversion to Ambiguity for Therapeutic Inertia among Neurologists (DIScUTIR MS) Open
TI is a common phenomenon affecting nearly 7 out of 10 physicians caring for MS patients. Higher prevalence of TI was associated with physician's strong aversion to ambiguity and low tolerance of uncertainty.
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Aversion to ambiguity and model misspecification in dynamic stochastic environments Open
Significance In many dynamic economic settings, a decision maker finds it challenging to quantify the uncertainty or assess the potential for mistakes in models. We explore alternative ways of acknowledging these challenges by drawing on i…
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Ambiguity Preferences and Portfolio Choices: Evidence from the Field Open
We match administrative panel data on portfolio choices with survey data on preferences over ambiguity. We show that ambiguity averse investors bear more risk, due to a lack of diversification. In particular, they exhibit a form of home bi…
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Neural Mechanisms Underlying Risk and Ambiguity Attitudes Open
Individual differences in attitudes to risk (a taste for risk, known probabilities) and ambiguity (a tolerance for uncertainty, unknown probabilities) differentially influence risky decision-making. However, it is not well understood wheth…
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Allais, Ellsberg, and preferences for hedging Open
Two of the most well known regularities observed in preferences under risk and uncertainty are ambiguity aversion and the Allais paradox. We study the behavior of an agent who can display both tendencies simultaneously. We introduce a nove…
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Revealed preferences under uncertainty: Incomplete preferences and preferences for randomization Open
We present a set of experiments testing for incomplete preferences due to uncertainty. In a first experiment, we observe that approximately half of the participants exhibit a choice pattern inconsistent with models assuming complete prefer…
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Experimental elicitation of ambiguity attitude using the random incentive system Open
We demonstrate how the standard usage of the random incentive system in ambiguity experiments eliciting certainty and probability equivalents might not be incentive compatible if the decision-maker is ambiguity averse. We propose a slight …
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POSTTRAUMATIC STRESS SYMPTOMS AND AVERSION TO AMBIGUOUS LOSSES IN COMBAT VETERANS Open
These results provide a foundation for prospective studies of the causal association between ambiguity attitudes and trauma-related symptoms, as well as etiologic studies of the neural underpinnings of these behavioral outcomes. More gener…
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Ambiguity preferences for health Open
In most medical decisions, probabilities are ambiguous and not objectively known. Empirical evidence suggests that people's preferences are affected by ambiguity. Health economic analyses generally ignore ambiguity preferences and assume t…
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Estimating Individual Ambiguity Aversion: A Simple Approach Open
We introduce a simple, easy to implement instrument for jointly eliciting risk and ambiguity attitudes.Using this instrument, we structurally estimate a two-parameter model of preferences.Our findings indicate that ambiguity aversion is si…
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Randomization and Ambiguity Aversion Open
We propose a model of preferences in which the effect of randomization on ambiguity depends on how the unknown probability law is determined. We adopt the framework of Anscombe and Aumann (1963) and relax the axioms. In the resulting repre…
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Information Inertia Open
We show that aversion to risk and ambiguity leads to information inertia when investors process public news about assets. Optimal portfolios do not always depend on news that is worse than expected; hence, the equilibrium stock price does …
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A survey of belief-based guilt aversion in trust and dictator games Open
The evidence for belief-based guilt aversion is reviewed with a particular focus on trust games and dictator games. By way of comparison an alternative model to belief-based guilt aversion is proposed which is based on an internalized norm…
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Past experience of uncertainty affects risk aversion Open
In an experiment with more than 500 participants we study how past experience of uncertainty (imperfect knowledge of the state space) affects risk preferences. Participants in our experiment choose between a sure outcome and a lottery in 3…
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Option implied ambiguity and its information content: Evidence from the subprime crisis Open
This paper studies option investors’ tendency to deviate from risk-neutrality around extreme financial events. We incorporate ambiguity into Black–Scholes theory and analyze the lead–lag association between option and stock markets during …
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Are Stocks Riskier over the Long Run? Taking Cues from Economic Theory Open
We study whether stocks are riskier or safer in the long run from the perspective of Bayesian investors who employ the long-run risk, habit formation, or prospect theory models to form prior beliefs about return dynamics. Economic theory d…
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Risk, ambiguity and willingness to participate in crop insurance programs: Evidence from a field experiment* Open
This paper analyses smallholder farmers’ willingness to participate in crop insurance programs, using recent data from cocoa farmers in Ghana. Given the significance of output uncertainty and imperfect capital and insurance markets, we dev…
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Measuring higher order ambiguity preferences Open
We report the results from an experiment designed to measure attitudes towards ambiguity beyond ambiguity aversion. In particular, we implement recently-proposed model-free preference conditions of ambiguity prudence and ambiguity temperan…
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Time-consistency of optimal investment under smooth ambiguity Open
We study portfolio choice in a Black–Scholes world under drift uncertainty. Preferences towards risk and ambiguity are modeled using the smooth ambiguity approach under a double power utility assumption and a normal distribution assumption…
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Discriminating Between Models of Ambiguity Attitude: a Qualitative Test Open
During recent decades, many new models have emerged in pure and applied economic theory according to which agents’ choices may be sensitive to ambiguity in the uncertainty that faces them. The exchange between Epstein (2010) and Klibanoff …
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Are Investors’ Attention and Uncertainty Aversion the Risk Factors for Stock Markets? International Evidence from the COVID-19 Crisis Open
In this paper, we examine the impact of investors’ attention to COVID-19 on stock market returns and the moderating effect of national culture on this relationship. Using daily data from 34 countries over the period 23 January to 12 June 2…