IDEAS home Printed from https://ideas.repec.org/a/ecm/emetrp/v81y2013i3p1039-1074.html
   My bibliography  Save this article

Temporal Resolution of Uncertainty and Recursive Models of Ambiguity Aversion

Author

Listed:
  • Tomasz Strzalecki

Abstract

Dynamic models of ambiguity aversion are increasingly popular in applied work. This paper shows that there is a strong interdependence in such models between the ambiguity attitude and the preference for the timing of the resolution of uncertainty, as defined by the classic work of Kreps and Porteus (1978). The modeling choices made in the domain of ambiguity aversion influence the set of modeling choices available in the domain of timing attitudes. The main result is that the only model of ambiguity aversion that exhibits indifference to timing is the maxmin expected utility of Gilboa and Schmeidler (1989). This paper examines the structure of the timing nonindifference implied by the other commonly used models of ambiguity aversion. This paper also characterizes the indifference to long-run risk, a notion introduced by Duffie and Epstein (1992). The interdependence of ambiguity and timing that this paper identifies is of interest both conceptually and practically—especially for economists using these models in applications.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Tomasz Strzalecki, 2013. "Temporal Resolution of Uncertainty and Recursive Models of Ambiguity Aversion," Econometrica, Econometric Society, vol. 81(3), pages 1039-1074, May.
  • Handle: RePEc:ecm:emetrp:v:81:y:2013:i:3:p:1039-1074
    DOI: ECTA9619
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.3982/ECTA9619
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fabrice Collard & Sujoy Mukerji & Kevin Sheppard & Jean-Marc Tallon, 2011. "Ambiguity and the historical equity premium," Documents de travail du Centre d'Economie de la Sorbonne 11032r, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Aug 2012.
    2. Nengjiu Ju & Jianjun Miao, 2012. "Ambiguity, Learning, and Asset Returns," Econometrica, Econometric Society, vol. 80(2), pages 559-591, March.
    3. Sarver, Todd & Ergin, Haluk, 2015. "Hidden actions and preferences for timing of resolution of uncertainty," Theoretical Economics, Econometric Society, vol. 10(2), May.
    4. Pierpaolo Benigno & Salvatore Nisticò, 2012. "International Portfolio Allocation under Model Uncertainty," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(1), pages 144-189, January.
    5. Simon Quemin, 2016. "Intertemporal abatement decisions under ambiguity aversion in a cap and trade," Working Papers 1604, Chaire Economie du climat.
    6. Simone Cerreia Vioglio & Fabio Maccheroni & Massimo Marinacci, 2016. "Absolute and Relative Ambiguity Aversion: A Preferential Approach," Working Papers 578, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    7. Russell Golman & David Hagmann & George Loewenstein, 2017. "Information Avoidance," Journal of Economic Literature, American Economic Association, vol. 55(1), pages 96-135, March.
    8. Pierre Collin-Dufresne & Michael Johannes & Lars A. Lochstoer, 2016. "Parameter Learning in General Equilibrium: The Asset Pricing Implications," American Economic Review, American Economic Association, vol. 106(3), pages 664-698, March.
    9. Massimo Marinacci, 2015. "Model Uncertainty," Journal of the European Economic Association, European Economic Association, vol. 13(6), pages 1022-1100, December.
    10. Ravi Bansal & Hengjie Ai, 2016. "Macro Announcement Premium and Risk Preferences," 2016 Meeting Papers 715, Society for Economic Dynamics.
    11. Buckenmaier, Johannes & Dimant, Eugen & Posten, Ann-Christin & Schmidt, Ulrich, 2017. "On punishment institutions and effective deterrence of illicit behavior," Kiel Working Papers 2090, Kiel Institute for the World Economy (IfW).
    12. Bergeron, Claude, 2013. "Dividend sensitivity to economic factors, stock valuation, and long-run risk," Finance Research Letters, Elsevier, vol. 10(4), pages 184-195.
    13. repec:rsr:supplm:v:65:y:2017:i:6:p:40-50 is not listed on IDEAS
    14. Gumen, Anna & Savochkin, Andrei, 2013. "Dynamically stable preferences," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1487-1508.
    15. Gallant, A. Ronald & Jahan-Parvar, Mohammad & Liu, Hening, 2015. "Measuring Ambiguity Aversion," Finance and Economics Discussion Series 2015-105, Board of Governors of the Federal Reserve System (U.S.).
    16. Hengjie Ai & Ravi Bansal, 2016. "Risk Preferences and The Macro Announcement Premium," NBER Working Papers 22527, National Bureau of Economic Research, Inc.
    17. Li, Jian & Zhou, Junjie, 2016. "Blackwell's informativeness ranking with uncertainty-averse preferences," Games and Economic Behavior, Elsevier, vol. 96(C), pages 18-29.
    18. Daniele Pennesi, 2013. "Asset Prices in an Ambiguous Economy," Carlo Alberto Notebooks 315, Collegio Carlo Alberto.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecm:emetrp:v:81:y:2013:i:3:p:1039-1074. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/essssea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.