Does Ambiguity Aversion Survive in Experimental Asset Markets?

57 Pages Posted: 3 Mar 2013 Last revised: 27 Mar 2014

Sascha Füllbrunn

Radboud University Nijmegen - Institute for Management Research

Holger Andreas Rau

University of Göttingen

Utz Weitzel

Utrecht University - Utrecht University School of Economics; Radboud University - Economics Department, IMR

Date Written: March 27, 2014

Abstract

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

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

Sascha Füllbrunn

Radboud University Nijmegen - Institute for Management Research ( email )

PO Box 9108
Nijmegen, 6500 HK
Netherlands

HOME PAGE: http://www.ru.nl/english/people/fullbrunn-s/

Holger Andreas Rau

University of Göttingen ( email )

Platz der Göttinger Sieben 3
Göttingen, Niedersachsen 37073
Germany

Utz Weitzel (Contact Author)

Utrecht University - Utrecht University School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

Radboud University - Economics Department, IMR ( email )

Nijmegen, 6500 HK
Netherlands

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