Welfare implications of mitigating investment uncertainty

Takayuki Ogawa () and Jun Sakamoto ()
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Takayuki Ogawa: Osaka University of Economics
Jun Sakamoto: Kobe International University

Annals of Finance, 2021, vol. 17, issue 4, No 5, 559-582

Abstract: Abstract This study explores the welfare implications of mitigating investment uncertainty in the context of Easley and O’Hara (Rev Financ Stud 22:1817–1843, 2009) While one may expect welfare gains by encouraging participation in financial markets by ambiguity-averse investors, we formally show that it hurts other investors and thus is not Pareto-improving without appropriate income transfers. We also examine the welfare effects of income redistribution among heterogeneous investors and government spending on investor education.

Keywords: Ambiguity; Heterogeneous agents; Uncertainty; Welfare effects (search for similar items in EconPapers)
JEL-codes: D81 G11 G18 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10436-021-00395-3

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