Ambiguity Aversion and Household Portfolio Choice: Empirical Evidence
AbstractThis paper tests the effects of ambiguity aversion on household portfolio choice. We measure ambiguity aversion with custom-designed questions based on Ellsberg urns, using a large representative survey of U.S. households. As theory predicts, ambiguity aversion is negatively associated with stock market participation and with the fraction of wealth allocated to stocks. Moreover, the effect is large: the participation rate is 3.9 percentage points lower among ambiguity averse respondents, compared to ambiguity neutral/seeking respondents. We also find that, conditional on prior stock ownership, ambiguity averse respondents were more likely to sell stocks during the financial crisis.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18743.
Date of creation: Jan 2013
Date of revision:
Note: AG LS
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Find related papers by JEL classification:
- C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-02-03 (All new papers)
- NEP-EVO-2013-02-03 (Evolutionary Economics)
- NEP-UPT-2013-02-03 (Utility Models & Prospect Theory)
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