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Welfare implications of mitigating investment uncertainty

Author

Listed:
  • Takayuki Ogawa

    (Osaka University of Economics)

  • Jun Sakamoto

    (Kobe International University)

Abstract

This study explores the welfare implications of mitigating investment uncertainty in the context of Easley and O’Hara (Rev Financ Stud 22:1817–1843, 2009) While one may expect welfare gains by encouraging participation in financial markets by ambiguity-averse investors, we formally show that it hurts other investors and thus is not Pareto-improving without appropriate income transfers. We also examine the welfare effects of income redistribution among heterogeneous investors and government spending on investor education.

Suggested Citation

  • Takayuki Ogawa & Jun Sakamoto, 2021. "Welfare implications of mitigating investment uncertainty," Annals of Finance, Springer, vol. 17(4), pages 559-582, December.
    • Handle: RePEc:kap:annfin:v:17:y:2021:i:4:d:10.1007_s10436-021-00395-3
    DOI: 10.1007/s10436-021-00395-3
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    More about this item

    Keywords

    Ambiguity; Heterogeneous agents; Uncertainty; Welfare effects;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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