Ambiguity Aversion and Household Portfolio Choice: Empirical Evidence
Stephen G. Dimmock,Roy Kouwenberg,Roy Kouwenberg,Olivia S. Mitchell,Olivia S. Mitchell,Kim Peijnenburg,Kim Peijnenburg +6 more
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In this article, the authors measured ambiguity aversion with custom-designed questions based on Ellsberg urns, using a large representative survey of U.S. households, and found that ambiguity aversion is negatively associated with stock market participation and with the fraction of wealth allocated to stocks.Abstract:
This paper tests the effects of ambiguity aversion on household portfolio choice. We measure ambiguity aversion with custom-designed questions based on Ellsberg urns, using a large representative survey of U.S. households. As theory predicts, ambiguity aversion is negatively associated with stock market participation and with the fraction of wealth allocated to stocks. Moreover, the effect is large: the participation rate is 4.3 percentage points lower among ambiguity averse respondents, compared to ambiguity neutral/seeking respondents. We also find that, conditional on prior stock ownership, ambiguity averse respondents were more likely to sell stocks during the financial crisis.read more
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Financial Literacy, Portfolio Choice, and Financial Well-Being
TL;DR: Wang et al. as mentioned in this paper examined potential effects of financial literacy on household portfolio choice and investment return, an indicator of financial wellbeing using data from the 2014 Chinese Survey of Consumer Finance, financial literacy was measured and further categorized into basic financial literacy and advanced financial literacy.
Journal ArticleDOI
Ambiguity aversion and stock market participation: An empirical analysis ☆
TL;DR: In this paper, the authors show that increases in ambiguity significantly reduce the likelihood that the average household invests in equities, by measuring participation using equity fund flows and ambiguity with dispersion in analyst forecasts about aggregate returns.
Journal ArticleDOI
Ambiguity Aversion and Stock Market Participation: Evidence from Fund Flows
TL;DR: The authors empirically test this hypothesis, measuring stock market participation using equity fund flows and ambiguity with dispersion in analyst forecasts about aggregate market returns, and show that increases in ambiguity are significantly and negatively related to equity fund flow, and thus support the notion that limited market participation is related to ambiguity aversion.
Journal ArticleDOI
Ambiguity Preferences and Portfolio Choices: Evidence from the Field
Milo Bianchi,Jean-Marc Tallon +1 more
TL;DR: The authors show that ambiguity averse investors bear more risk due to a lack of diversification, while ambiguity tolerant investors are more risk-tolerant due to their preference over ambiguity.
Journal ArticleDOI
Beware of black swans: Taking stock of the description–experience gap in decision under uncertainty
André de Palma,Mohammed Abdellaoui,Giuseppe Attanasi,Moshe Ben-Akiva,Ido Erev,Helga Fehr-Duda,Dennis Fok,Craig R. Fox,Ralph Hertwig,Nathalie Picard,Peter P. Wakker,Joan L. Walker,Martin Weber +12 more
TL;DR: This paper observes that a robust description–experience gap remains when a source of underweighting of rare events in DFE may be sampling error, and suggests that different assumed error structures in DFD and DFE also contribute to the gap.
References
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