Ambiguity attitudes in a large representative sample

• Main Authors: Stephen G. Dimmock, Roy Kouwenberg, Peter P. Wakker
• Other Authors: Nanyang Business School
• Format: Article
• Published: 2018
• Subjects: Business, Management and Accounting; Decision Sciences
• Online Access: https://repository.li.mahidol.ac.th/handle/123456789/43311
• Institution: Mahidol University

©2016 INFORMS. Using a theorem showing that matching probabilities of ambiguous events can capture ambiguity attitudes, we introduce a tractable method for measuring ambiguity attitudes and apply it in a large representative sample. In addition to ambiguity aversion, we confirm an ambiguity component recently found in laboratory studies: a-insensitivity, the tendency to treat subjective likelihoods as 50-50, thus overweighting extreme events. Our ambiguity measurements are associated with real economic decisions; specifically, a-insensitivity is negatively related to stock market participation. Ambiguity aversion is also negatively related to stock market participation, but only for subjects who perceive stock returns as highly ambiguous.