Ambiguity and private investors’ behavior after forced fund liquidations

Steffen Meyer and Charline Uhr

Journal of Financial Economics, 2024, vol. 156, issue C

Abstract: We investigate individual investors' decisions under time-varying ambiguity (VVIX) using plausibly exogenous forced mutual fund liquidations at a German brokerage. Investors reinvest 87% of forced liquidations when the refund occurs on a day of low ambiguity and 0% when it occurs on a day of high ambiguity. Instead of reinvesting, investors become inert and keep the refund in their cash holdings. The effect reverses approximately six months after the liquidation. If investors reinvest, they decrease their risk-taking under ambiguity. Our results are not driven by risk, rebalancing decisions, experiencing losses, or attention and are robust to alternative measures of ambiguity.

Keywords: ambiguity; uncertainty; individual investor; reinvestment; inertia; risk-taking (search for similar items in EconPapers)
JEL-codes: D14 D81 G11 G51 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X24000722
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:156:y:2024:i:c:s0304405x24000722

DOI: 10.1016/j.jfineco.2024.103849

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().