Reaction to Public Information in Markets: How Much Does Ambiguity Matter?
Brice Corgnet (),
Praveen Kujal () and
Working Papers from Chapman University, Economic Science Institute
In real world situations the fundamental value of an asset is ambiguous. Recent theory has incorporated ambiguity in the dividend process and the information observed by investors, and studied its effect on asset prices. In this paper we experimentally study trader reaction to ambiguity when dividend information is revealed sequentially. Price changes are consistent with news revelation regarding the dividend regardless of subject experience and the degree of ambiguity. Further, there is no under or over price reactions to news. Regardless of experience, market reaction to news moves in line with fundamentals. Also, no significant differences are observed in the control versus ambiguity treatments regarding prices, price volatility and volumes for experienced subjects. Our results indicate that the role of ambiguity aversion in explaining financial anomalies is limited.
Keywords: Ambiguity; Dividend Revelation; Price Changes; Reaction to News; Experience (search for similar items in EconPapers)
JEL-codes: G10 G12 (search for similar items in EconPapers)
Pages: 54 pages
New Economics Papers: this item is included in nep-exp and nep-upt
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Journal Article: Reaction to Public Information in Markets: How much does Ambiguity Matter? (2013)
Working Paper: Reaction to Public Information in Markets: How much does Ambiguity Matter? (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:11-01
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