Does ambiguity aversion survive in experimental asset markets?

Sascha Füllbrunn (), Holger A. Rau and Utz Weitzel

Journal of Economic Behavior & Organization, 2014, vol. 107, issue PB, 810-826

Abstract: Although a number of theoretical studies explain empirical puzzles in finance with ambiguity aversion, it is not a given that individual ambiguity attitudes survive in markets. In fact, despite ample evidence of ambiguity aversion in individual decision making, most studies find no or only limited ambiguity aversion in experimental financial markets, even when they exclude arbitrage. We argue that ambiguity effects in markets depend on market feedback and on a sufficiently strong bias toward ambiguity among the participants. Accordingly, we find significant ambiguity effects in low-feedback call markets for assets that provoke high ambiguity aversion, but no ambiguity effects in high-feedback double auctions.

Keywords: Financial market; Experiment; Ambiguity; Uncertainty (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:107:y:2014:i:pb:p:810-826

DOI: 10.1016/j.jebo.2014.03.013

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