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The Distribution and Relevance of Ambiguity Attitudes

Author

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  • Hans-Martin von Gaudecker
  • Axel Wogrolly
  • Christian Zimpelmann

Abstract

This paper analyzes the stability and distribution of ambiguity attitudes using a broad population sample. Using six waves of data, a structural stochastic choice model yields three individual-level parameters: ambiguity aversion, ambiguity-induced insensitivity, and the magnitude of decision errors. These parameters are heterogeneous across individuals, but stable over time and across the domains of financial markets and climate change. We summarize heterogeneity using a discrete classification approach with four types. We label these types as being near ambiguity neutral, ambiguity-averse, ambiguity-seeking, or erratic. Observed characteristics vary between groups in plausible ways. Ambiguity types predict risky asset allocation, even after controlling for covariates.

Suggested Citation

  • Hans-Martin von Gaudecker & Axel Wogrolly & Christian Zimpelmann, 2022. "The Distribution and Relevance of Ambiguity Attitudes," CRC TR 224 Discussion Paper Series crctr224_2022_272v3, University of Bonn and University of Mannheim, Germany, revised Mar 2025.
    • Handle: RePEc:bon:boncrc:crctr224_2022_272v3
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    References listed on IDEAS

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    1. Stephen G. Dimmock & Roy Kouwenberg & Peter P. Wakker, 2016. "Ambiguity Attitudes in a Large Representative Sample," Management Science, INFORMS, vol. 62(5), pages 1363-1380, May.
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    More about this item

    Keywords

    ambiguity attitudes; temporal stability; domain specificity; cluster analysis; household portfolio choice;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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