Ambiguity Attitudes about Investments: Evidence from the Field

Kim Peijnenburg, Kanin Anantanasuwong, Roy Kouwenberg and Olivia Mitchell

No 13518, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Using an incentivized survey and a representative sample of investors, we elicit ambiguity attitudes toward a familiar company stock, a local stock index, a foreign stock index, and a crypto currency. We separately estimate ambiguity aversion (ambiguity preferences) and perceived ambiguity levels (perceptions about ambiguity), while controlling for unknown likelihood beliefs. We show that ambiguity aversion is highly correlated across different assets and can be summarized by a single underlying factor. By contrast, individuals’ perceived ambiguity levels differ depending on the type of asset and cannot be summarized by a single underlying factor. Perceived ambiguity is mitigated by financial literacy and education, while the preference component is correlated with risk aversion. Perceived ambiguity proves to be related to actual investment choices, validating our measure. Finally, our results imply that policies enhancing financial literacy and knowledge of financial markets can help stimulate equity market participation and reduce inequality, as these reduce peoples’ perceived levels of ambiguity about financial assets.

Keywords: Ambiguity; decision-making under uncertainty; investment; Preferences; Financial literacy (search for similar items in EconPapers)
JEL-codes: C93 D14 D81 (search for similar items in EconPapers)
Date: 2019-02
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Citations: View citations in EconPapers (15)

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Working Paper: Ambiguity Attitudes about Investments: Evidence from the Field (2019)
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