Ambiguity about volatility and investor behavior

Dimitrios Kostopoulos, Steffen Meyer and Charline Uhr

Journal of Financial Economics, 2022, vol. 145, issue 1, 277-296

Abstract: We relate time-varying aggregate ambiguity about volatility (V-VSTOXX) to individual investor trading. We use the trading records of more than 100,000 individual investors from a large German online brokerage from March 2010 to December 2015. We find that an increase in ambiguity is associated with increased investor activity. It also leads to a reduction in risk-taking, which does not reverse over the following days. Ambiguity averse investors are more prone to ambiguity shocks. These results replicate when using the dispersion of professional forecasters as a long-term measure of ambiguity and are robust when controlling for newspaper- or market-based ambiguity measures.

Keywords: Ambiguity; Uncertainty; Individual investor; Risk-taking; Trading behavior (search for similar items in EconPapers)
JEL-codes: D14 D81 G11 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:145:y:2022:i:1:p:277-296

DOI: 10.1016/j.jfineco.2021.07.004

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