RISK, AMBIGUITY, AND DIVERSIFICATION

Santiago I. Sautua ()

No 14588, Documentos de Trabajo from Universidad del Rosario

Abstract: Attitudes toward risk inuence the decision to diversify among uncertain options. Yet, because in most situations the options are ambiguous, attitudes toward ambiguity may also play an important role. I conduct a laboratory experiment to investigate the effect of ambiguity on the decision to diversify. I fi nd that diversi cation is more prevalent and more persistent under ambiguity than under risk. Moreover, excess diversi cation under ambiguity is driven by participants who stick with a status quo gamble when diversi cation among gambles is not feasible. This behavioral pattern cannot be accommodated by major theories of choice under ambiguity

Keywords: risk; ambiguity; inertia; diversi cation; reference-dependent preferences; indecisiveness; ambiguity aversion (search for similar items in EconPapers)
JEL-codes: C91 D01 D03 D81 (search for similar items in EconPapers)
Pages: 41
Date: 2016-03-11
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:col:000092:014588

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