Ambiguity and asset markets

Annual Review of Financial Economics

Volumn 2, Issue , 2010, Pages 315-346

  Epstein, Larry G ^a   Schneider, Martin ^b  

^a Boston University   (United States)

^b STANFORD UNIVERSITY   (United States)

Author keywords

Asset pricing; Portfolio choice

Indexed keywords

EID: 78650044912     PISSN: 19411367     EISSN: 19411375     Source Type: Journal    
DOI: 10.1146/annurev-financial-120209-133940     Document Type: Article

References (79)

1. Ahn D, Choi S, Gale D, Kariv S. 2009. Estimating ambiguity aversion in a portfolio choice experiment. Work. Pap., UC Berkeley
2. Anderson E, Hansen LP, Sargent TJ. 2003. A quartet of semigroups for model specification, robustness, prices of risk and model detection. J. Eur. Econ. Assoc. 1:68-123
3. Anscombe F, Aumann RJ. 1963. A definition of subjective probability. Ann. Math. Stat. 34:199-205
4. Autore D, Billingsley R, Schneller M. 2009. Information uncertainty and auditor reputation. J. Bank. Finance 33:183-92
5. Boyarchenko N. 2009. Ambiguity, information quality and credit risk. Work. Pap., Univ. Chicago
6. Baillon A, Driesen B, Wakker PP. 2009. Relative concave utility for risk and ambiguity. Work. Pap., Maastricht Univ.
7. Barillas F, Hansen LP, Sargent TJ. 2009. Doubts or variability? J. Econ. Theory 144:2388-418
8. Benigno P, Nistico S. 2009. International portfolio allocation under model uncertainty. Work. Pap. 14734, NBER
9. Bossaerts P, Ghirardato P, Guarnaschelli S, Zame WR. 2010. Ambiguity in asset markets: theory and experiment. Rev. Financ. Stud. In press
10. Caballero R, Krishnamurthy A. 2008. Collective risk management in a flight to quality episode. J. Finance 63(5):2195-230
11. Caballero R, Simsek A. 2009. Fire sales in a model of complexity. Work. Pap., MIT
12. Campanale C. 2010. Learning, ambiguity and life-cycle portfolio allocation. Rev. Econ. Dyn. In press
13. Cao HH, Han B, Zhang HH, Hirshleifer D. 2007. Familiarity and fear of the unknown. Work. Pap., Univ. North Carolina
14. Cao HH, Wang T, Zhang HH. 2005. Model uncertainty, limited market participation, and asset prices. Rev. Financ. Stud. 18:1219-51 (Pubitemid 41539626)
15. Caskey J. 2009. Information in equity markets with ambiguity-averse investors. Rev. Financ. Stud. 22(9):3595-627
16. Chapman D, Polkovnichenko V. 2009. First order risk aversion, heterogeneity and asset market outcomes. J. Finance 64(4):1863-87
17. Chen H, Ju N, Miao J. 2009. Dynamic asset allocation with ambiguous return predictability. Work. Pap., Boston Univ.
18. Chen Z, Epstein LG. 2002. Ambiguity, risk and asset returns in continuous time. Econometrica 70:1403-43 (Pubitemid 34799525)
19. Condie S. 2010. Living with ambiguity: prices and survival when investors have heterogeneous preferences for ambiguity. Econ. Theory. In press
20. Condie S, Ganguli J 2009. Ambiguity and partially-revealing rational expectations equilibria. Work. Pap., Univ. Cambridge
21. Dow J, Werlang SR. 1992. Uncertainty aversion, risk aversion and the optimal choice of portfolio. Econometrica 60:197-204
22. Drechsler I. 2008. Uncertainty, time-varying fear, and asset prices. Work. Pap., Stern Sch. Bus., New York Univ.
23. Duffie D, Epstein LG. 1992. Stochastic differential utility. Econometrica 60:353-94; see also Appendix C with C Skiadas
24. Dupuis P, Ellis RS. 1997. A Weak Convergence Approach to the Theory of Large Deviations. New York: Wiley
25. Easley D, O'Hara M. 2009. Ambiguity and nonparticipation: the role of regulation. Rev. Financ. Stud. 22:1817-43
26. Ellsberg D. 1961. Risk, ambiguity and the Savage axioms. Q. J. Econ. 75:643-69
27. Epstein LG. 2010. A paradox for the "smooth ambiguity" model of preference. Econometrica. In press
28. Epstein LG, Schneider M. 2003. Recursive multiple-priors. J. Econ. Theory 113:1-31 (Pubitemid 37512916)
29. Epstein LG, Schneider M. 2007. Learning under ambiguity. Rev. Econ. Stud. 74:1275-303 (Pubitemid 47382376)
30. Epstein LG, Schneider M. 2008. Ambiguity, information quality and asset pricing. J. Finance 63:197-228
31. Epstein LG, Wang T. 1994. Intertemporal asset pricing under Knightian uncertainty. Econometrica 62:283-322
32. Epstein LG, Zin S. 1989. Substitution, risk aversion and the temporal behavior of consumption and asset returns: a theoretical framework. Econometrica 57:937-69
33. Gagliardini P, Porchia P, Trojani F. 2009. Ambiguity aversion and the term structure of interest rates. Rev. Financ. Stud. 22:4157-88
34. Gajdos T, Hayashi T, Talon JM, Vergnaud JC. 2008. Attitude towards imprecise information. J. Econ. Theory 140:27-65
35. Garlappi L, Uppal R, Wang T. 2007. Portfolio selection with parameter and model uncertainty: a multi-prior approach. Rev. Financ. Stud. 20:41-81 (Pubitemid 44968266)
36. Gilboa I, Schmeidler D. 1989. Maxmin expected utility with non-unique priors. J. Math. Econ. 18:141-53
37. Guidolin M, Rinaldi F. 2009. A simple model of trading and pricing risky assets under ambiguity: any lessons for policy makers. Work. Pap., Fed. Reserve Board, St. Louis
38. Halevy Y, Ozdenoren E. 2008. Ambiguity and compound lotteries: calibration. Work. Pap., Univ. Br. Columbia
39. Hansen LP. 2007. Beliefs, doubts and learning: valuing macroeconomic risk. Am. Econ. Rev. 97:1-30
40. Hansen LP, Sargent TJ. 2001. Robust control and model uncertainty. Am. Econ. Rev. 91:60-66
41. Hansen LP, Sargent TJ. 2007. Recursive robust estimation and control without commitment. J. Econ. Theory 136:1-27
42. Hansen LP, Sargent TJ. 2009. Fragile beliefs and the price of uncertainty. Work. Pap., Univ. Chicago
43. Hayashi T. 2005. Intertemporal substitution, risk aversion and ambiguity aversion. Econ. Theory 25:933-56 (Pubitemid 40900159)
44. Huber PJ. 1981. Robust Statistics. New York: Wiley
45. Illeditsch P. 2010. Ambiguous information, risk aversion and asset pricing. Work. Pap., Wharton Sch. Bus.
46. Ilut CL. 2009. Ambiguity aversion: implications for the uncovered interest rate parity puzzle. Work. Pap., Duke Univ.
47. Jeong D, Kim H, Park Y. 2009. Does ambiguity matter? Estimating asset pricing models with multiplepriors recursive utility. Work. Pap., Texas A&M
48. Ju N, Miao J. 2009. Ambiguity, learning and asset returns. Work. Pap., Boston Univ.
49. Kleschelski I, Vincent N. 2009. Robust equilibrium yield curves. Work. Pap., Washington Univ
50. Klibanoff P, Marinacci M, Mukerji S. 2005. A smooth model of decision making under ambiguity. Econometrica 73:1849-92 (Pubitemid 43906628)
51. Klibanoff P, Marinacci M, Mukerji S. 2009. Recursive smooth ambiguity preferences. J. Econ. Theory 144:930-76
52. Kopylov I. 2009. Choice deferral and ambiguity aversion. Theor. Econ. 4:199-225
53. Liu J, Pan J, Wang T. 2005. An equilibrium model of rare-event premia and its implication for option smirks. Rev. Financ. Stud. 18:131-64 (Pubitemid 40140327)
54. Maccheroni F, Marinacci M, Rustichini A. 2006a. Ambiguity aversion, malevolent nature, and the variational representation of preferences. Econometrica 74:1447-98 (Pubitemid 44673204)
55. Maccheroni F, Marinacci M, Rustichini A. 2006b. Dynamic variational preferences. J. Econ. Theory 128:399-424
56. Mele A, Sangiorgi F. 2009. Ambiguity, information acquisition and price swings in asset markets. Work. Pap., Lond. Sch. Econ.
57. Miao J. 2009. Ambiguity, risk and portfolio choice under incomplete information. Ann. Econ. Finance 10:257-79
58. Mukerji S, Tallon JM. 2001. Ambiguity aversion and incompleteness of financial markets. Rev. Econ. Stud. 68:883-904 (Pubitemid 34004580)
59. Mukerji S, Tallon JM. 2004. Ambiguity aversion and the absence of indexed debt. Econ. Theory 24(3):665-85 (Pubitemid 39305695)
60. Ozsoylev H, Werner J. 2009 Liquidity and asset prices in rational expectations equilibrium with ambiguous information. Work. Pap., Univ. Minn.
61. Routledge B, Zin S. 2009. Model uncertainty and liquidity. Rev. Econ. Dyn. 12(4):543-66
62. Sbuelz A, Trojani F. 2008. Asset prices with locally-constrained-entropy recursive multiple priors utility. J. Econ. Dyn. Control 32:3695-717
63. Schmeidler D. 1989. Subjective probability and expected utility without additivity. Econometrica 57:571-87
64. Schroder M, Skiadas C. 1999. Optimal consumption and portfolio selection with stochastic differential utility. J. Econ. Theory 89:68-126
65. Seo K. 2009. Ambiguity and second-order belief. Econometrica 77:1575-605
66. Skiadas C. 2003. Robust control and recursive utility. Finance Stochast. 7:475-89
67. Skiadas C. 2008. Dynamic porfolio choice and risk aversion. In Financial Engineering, ed. JR Birge, V Linetsky, 15:789-843. New York: Elsevier
68. Skiadas C. 2009a. Asset Pricing Theory. Princeton, NJ: Princeton Univ. Press
69. Skiadas C. 2009b. Smooth ambiguity aversion toward small risks and continuous-time recursive utility. Work. Pap., Kellogg Sch., Northwestern Univ.
70. Strzalecki T. 2010. Axiomatic foundations of multiplier preferences. Econometrica. In press
71. Tallarini TD. 2000. Risk-sensitive business cycles. J. Monet. Econ. 45:507-32
72. Trojani F, Vanini P. 2002. A note on robustness in Merton's model of intertemporal consumption and portfolio choice. J. Econ. Dyn. Control 26:423-35 (Pubitemid 39631351)
73. Trojani F, Vanini P. 2004. Robustness and ambiguity aversion in general equilibrium. Rev. Finance 8:279-324 (Pubitemid 39363750)
74. Uhlig H. 2009. A model of a systemic bank run. Work. Pap., Univ. Chicago
75. Ui T. 2009. The ambiguity premium vs. the risk premium under limited market participation. Work. Pap., Yokohama Natl. Univ.
76. Ulrich M. 2009. Inflation ambiguity and the term structure of arbitrage-free U. S. government bonds. Work. Pap., Columbia Univ.
77. Uppal R, Wang T. 2003. Model misspecification and under diversification. J. Finance 58:2465-86
78. Vissing-Jorgensen A. 2004. Perspectives on behavioral finance: Does "irrationality" disappear with wealth? Evidence from expectations and actions. NBER Macroecon. Annu. 2003 18:139-208
79. Williams C. 2009. Asymmetric responses to good and bad news: an empirical case for ambiguity. Work. Pap., Univ. Michigan