Ambiguity Attitudes about Investments: Evidence from the Field / Kanin Anantanasuwong, Roy Kouwenberg, Olivia S. Mitchell, Kim Peijnenberg.

Format:

Book

Author/Creator:

Anantanasuwong, Kanin.

Contributor:

National Bureau of Economic Research.

Kouwenberg, Roy.

Mitchell, Olivia S.

Peijnenberg, Kim.

Series:

Working Paper Series (National Bureau of Economic Research) no. w25561.

NBER working paper series no. w25561

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Ambiguity Attitudes about Investments

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

Using an incentivized survey and a representative sample of investors, we elicit ambiguity attitudes toward a familiar company stock, a local stock index, a foreign stock index, and a crypto currency. We separately estimate ambiguity aversion (ambiguity preferences) and perceived ambiguity levels (perceptions about ambiguity), while controlling for unknown likelihood beliefs. We show that ambiguity aversion is highly correlated across different assets and can be summarized by a single underlying factor. By contrast, individuals' perceived ambiguity levels differ depending on the type of asset and cannot be summarized by a single underlying factor. Perceived ambiguity is mitigated by financial literacy and education, while the preference component is correlated with risk aversion. Perceived ambiguity proves to be related to actual investment choices, validating our measure. Finally, our results imply that policies enhancing financial literacy and knowledge of financial markets can help stimulate equity market participation and reduce inequality, as these reduce peoples' perceived levels of ambiguity about financial assets.

Notes:

Print version record

February 2019.