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Title: Ambiguity Attitudes about Investments: Evidence from the Field

Author(s): Kanin Anantanasuwong, Roy Kouwenberg, Olivia S Mitchell and Kim Peijnenburg

Publication Date: February 2019

Keyword(s): Ambiguity, decision-making under uncertainty, financial literacy, investment and preferences

Programme Area(s): Financial Economics

Abstract: 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.

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Bibliographic Reference

Anantanasuwong, K, Kouwenberg, R, Mitchell, O and Peijnenburg, K. 2019. 'Ambiguity Attitudes about Investments: Evidence from the Field'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13518