Learning under ambiguity: An experiment using initial public offerings on a stock market

Aurelien Baillon (), Han Bleichrodt, Umut Keskin, Olivier L'Haridon and Author-Name: Chen Li
Additional contact information
Umut Keskin: Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE), the Netherlands
Author-Name: Chen Li: Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE), the Netherlands

Economics Working Paper Archive (University of Rennes & University of Caen) from Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS

Abstract: This paper studies the effect of learning new information on decision under uncertainty.Using ambiguity models, we show the effect of learning on beliefs and ambiguity attitudes. We develop a new method to correct beliefs for ambiguity attitudes and decompose ambiguity attitudes into pessimism (capturing ambiguity aversion) and likelihood insensitivity. We apply our method in an experiment using initial public offerings (IPOs) on the New York Stock Exchange. IPOs provide a natural decision context in which no prior information on returns is available. We found that likelihood insensitivity decreased with information, but pessimism was unaffected. Subjects moved in the direction of expected utility with more information, but significant deviations remained. Subjective probabilities,corrected for ambiguity attitudes, were well calibrated and close to market data.

Keywords: ambiguity; learning; updating; neo-additive weighting (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2013-08
New Economics Papers: this item is included in nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://ged.univ-rennes1.fr/nuxeo/site/esupversion ... f9-9612-2aaf8223b310 (application/pdf)

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:tut:cremwp:201331

Ordering information: This working paper can be ordered from
CREM (UMR CNRS 6211) - Faculty of Economics, 7 place Hoche, 35065 Rennes Cedex - France

Access Statistics for this paper

More papers in Economics Working Paper Archive (University of Rennes & University of Caen) from Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS CREM (UMR CNRS 6211) – Faculty of Economics, 7 place Hoche, 35065 RENNES Cedex. Contact information at EDIRC.
Bibliographic data for series maintained by GERMAIN Lucie ().