Impacts of ambiguity aversion and information uncertainty on momentum: An international study

Yujing Gong, Mei Wang and Dennis Dlugosch

Pacific-Basin Finance Journal, 2019, vol. 55, issue C, 1-28

Abstract: This paper examines how ambiguity aversion and information uncertainty jointly influence the momentum effect across countries. Most countries in our sample exhibit information uncertainty effect, i.e., the momentum effect is stronger for firms with greater uncertainty (e.g., smaller, younger, and more volatile firms). Moreover, we find that such information uncertainty effect is stronger in countries with lower degree of ambiguity aversion. The interaction effect of uncertainty and ambiguity aversion is mainly driven by losers, suggesting the information avoidance or “Ostrich Effect”. We offer two possible explanations for this result based on the potential impacts of ambiguity aversion on information reaction and information seeking.

Keywords: Momentum; Ambiguity aversion; Information uncertainty (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 G41 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Chapter: Impacts of Ambiguity Aversion and Information Uncertainty on Momentum: An International Study (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:55:y:2019:i:c:p:1-28

DOI: 10.1016/j.pacfin.2019.01.011

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