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A Factor Pricing Model under Ambiguity

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  • Katsutoshi Wakai

Abstract

We derive a factor pricing model undet the economy where the representative agent's preferences follow the smooth model of decision making under ambiguity as proposed by Klibanoff, Marinacci, and Mukerji (2005). A newly derived factor is called an ambiguity factor that captures a component of returns generated by ambigu- ity aversion.

Suggested Citation

  • Katsutoshi Wakai, 2018. "A Factor Pricing Model under Ambiguity," Discussion papers e-17-012, Graduate School of Economics , Kyoto University.
    • Handle: RePEc:kue:epaper:e-17-012
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    File URL: http://www.econ.kyoto-u.ac.jp/dp/papers/e-17-012.pdf
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    References listed on IDEAS

    as
    1. Nengjiu Ju & Jianjun Miao, 2012. "Ambiguity, Learning, and Asset Returns," Econometrica, Econometric Society, vol. 80(2), pages 559-591, March.
    2. Fama, Eugene F & French, Kenneth R, 1996. "Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
    3. Christian Gollier, 2011. "Portfolio Choices and Asset Prices: The Comparative Statics of Ambiguity Aversion," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(4), pages 1329-1344.
    4. A. Ronald Gallant & Mohammad Jahan-Parvar & Hening Liu, 2015. "Measuring Ambiguity Aversion," Finance and Economics Discussion Series 2015-105, Board of Governors of the Federal Reserve System (U.S.).
    5. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    6. Katsutoshi Wakai, 2015. "Equilibrium Alpha in Asset Pricing in an Ambiguity-averse Economy," Discussion papers e-15-010, Graduate School of Economics , Kyoto University.
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    Cited by:

    1. Katsutoshi WAKAI, 2019. "On Identification of Ambiguity Premium," Discussion papers e-18-009, Graduate School of Economics , Kyoto University.
    2. Katsutoshi WAKAI, 2023. "A Factor Pricing Model under Ambiguity:A Multi-Period Framework," Discussion papers e-22-012, Graduate School of Economics , Kyoto University.

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    More about this item

    Keywords

    Ambiguity aversion; asset pricing; factor pricing;
    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
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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