Abstract

https://ssrn.com/abstract=2162410
 
 

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Ambiguity Aversion and Household Portfolio Choice Puzzles: Empirical Evidence


Stephen G. Dimmock


Nanyang Technological University - Division of Finance

Roy Kouwenberg


Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Mahidol University - College of Management

Olivia S. Mitchell


University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Kim Peijnenburg


Netspar; HEC Paris; Centre for Economic Policy Research (CEPR)

May 29, 2015

Netspar Discussion Paper No. 09/2012-035 - revised version May 2015

Abstract:     
We test the relation between ambiguity aversion and five household portfolio choice puzzles: non-participation in equities, low allocations to equity, home-bias, own-company stock ownership, and portfolio under-diversification. In a representative U.S. household survey, we measure ambiguity preferences using custom-designed questions based on Ellsberg urns. As theory predicts, ambiguity aversion is negatively associated with stock market participation, the fraction of financial assets in stocks, and foreign stock ownership, but it is positively related to own-company stock ownership. Conditional on stock ownership, ambiguity aversion is related to portfolio under-diversification, and during the financial crisis, ambiguity-averse respondents were more likely to sell stocks.

Number of Pages in PDF File: 66

Keywords: ambiguity aversion, stock market participation, household portfolio puzzles, homebias, own-company stock puzzle, portfolio under-diversification, household finance

JEL Classification: G11, D81, D14, C83


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Date posted: October 16, 2012 ; Last revised: January 5, 2016

Suggested Citation

Dimmock, Stephen G. and Kouwenberg, Roy and Mitchell, Olivia S. and Peijnenburg, Kim, Ambiguity Aversion and Household Portfolio Choice Puzzles: Empirical Evidence (May 29, 2015). Netspar Discussion Paper No. 09/2012-035 - revised version May 2015. Available at SSRN: https://ssrn.com/abstract=2162410 or http://dx.doi.org/10.2139/ssrn.2162410

Contact Information

Stephen G. Dimmock
Nanyang Technological University - Division of Finance ( email )
S3-B1B-76 Nanyang Avenue
Singapore, 639798
Singapore
Roy R. P. Kouwenberg
Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )
P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
HOME PAGE: http://people.few.eur.nl/kouwenberg
Mahidol University - College of Management ( email )
69 Vipawadee Rangsit Road
Bangkok, 10400
Thailand
HOME PAGE: http://www.cmmu.mahidol.ac.th/main/faculty/aroy.asp
Olivia S. Mitchell (Contact Author)
University of Pennsylvania - The Wharton School ( email )
Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Kim Peijnenburg
Netspar ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
HEC Paris ( email )
1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Feedback to SSRN


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