Ambiguity Aversion and Household Portfolio Choice: Empirical Evidence

Stephen Dimmock, Roy Kouwenberg, Olivia Mitchell and Kim Peijnenburg

No 18743, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We test the relation between ambiguity aversion and five household portfolio choice puzzles: non- participation, low allocations to equity, home-bias, own-company stock ownership, and portfolio under- diversification. In a representative U.S. household survey, we measure ambiguity aversion using custom- designed questions based on Ellsberg urns. As theory predicts, ambiguity aversion is negatively associated with stock market participation, the fraction of financial assets in stocks, and foreign stock ownership, but positively related to own-company stock ownership. Conditional on stock ownership, ambiguity aversion is related to portfolio under-diversification, and during the financial crisis, ambiguity-averse respondents were more likely to sell stocks.

JEL-codes: C83 D14 D81 G11 (search for similar items in EconPapers)
Date: 2013-01
New Economics Papers: this item is included in nep-evo and nep-upt
Note: AG LS
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Citations: View citations in EconPapers (24)

Published as Stephen G. Dimmock & Roy Kouwenberg & Olivia S. Mitchell & Kim Peijnenburg, 2016. "Ambiguity aversion and household portfolio choice puzzles: Empirical evidence," Journal of Financial Economics, vol 119(3), pages 559-577.

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