Knightian uncertainty: evidence of uncertainty premium in the capital market

James Ang and Carol Boyer

Applied Economics Letters, 2010, vol. 17, issue 10, 945-949

Abstract: We empirically verify two predictions of asset pricing with a role for uncertainty: return premium to increase with uncertainty, and to decrease with the resolution of uncertainty over time and experience. These properties are found among Initial Public Offerings (IPOs) of new industries where uncertainty is created by innovations of new products and services, and resolution of uncertainty from early IPOs is to decline with later IPOs. Return premium for uncertainty is shown to be separate from all known measurable risks. Evidence that uncertainty is priced also lends support to the notion that investors are in general, averse to uncertainty.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.informaworld.com/openurl?genre=article& ... 40C6AD35DC6213A474B5 (text/html)
Access to full text is restricted to subscribers.

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:taf:apeclt:v:17:y:2010:i:10:p:945-949

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/17446540802599721

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().