Individual attitudes and market dynamics towards imprecision
Christoph Huber () and
Julia Rose ()
Working Papers from Faculty of Economics and Statistics, University of Innsbruck
In real world financial markets, dividend processes as well as fundamental values are governed by imprecision; neither the objective probabilities of returns nor the actual amounts of possible returns are known for certain. With a novel experimental approach, we analyze the impact of risk, imprecision in probabilities (ambiguity), imprecision in outcomes, and a combination of the latter two in an individual decision task and in a market environment. In contrast to the previous literature, we do not find any significant imprecision premia for imprecise probabilities. However, we do find significant and persistent imprecision-in-outcomes seeking in the individual task as well as the market setting. Looking deeper into the combination of individual attitudes and market behavior, we find that these patterns survive despite a high level of heterogeneity in individual's beliefs about outcomes.
Keywords: ambiguity aversion; imprecision; uncertainty; asset markets; experimental finance (search for similar items in EconPapers)
JEL-codes: G11 G12 C92 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:inn:wpaper:2019-06
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