57 Pages Posted: 3 Mar 2013 Last revised: 27 Mar 2014
Date Written: March 27, 2014
Although a number of theoretical studies explain empirical puzzles in finance with ambiguity aversion, it is not a given that individual ambiguity attitudes survive in markets. In fact, despite ample evidence of ambiguity aversion in individual decision making, most studies find no or only limited ambiguity aversion in experimental financial markets, even when they exclude arbitrage. We argue that ambiguity effects in markets depend on market feedback and on a sufficiently strong bias toward ambiguity among the participants. Accordingly, we find significant ambiguity effects in low-feedback call markets for assets that provoke high ambiguity aversion, but no ambiguity effects in high-feedback double auctions.
Suggested Citation: Suggested Citation
Füllbrunn, Sascha and Rau, Holger Andreas and Weitzel, Utz, Does Ambiguity Aversion Survive in Experimental Asset Markets? (March 27, 2014). Journal of Economic Behavior and Organization, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2227335 or http://dx.doi.org/10.2139/ssrn.2227335
By Holger Rau