Reaction to Public Information in Markets: How much does Ambiguity Matter?

Corgnet, Brice; Kujal, Praveen; Porter, David

doi:10.1111/j.1468-0297.2012.02557.x

Cited by 29 publications

(45 citation statements)

References 56 publications

(196 reference statements)

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“…The same hypothesis, however, can also be developed from models with heterogeneous agents, of which some are ambiguity neutral and some ambiguity averse (e.g., Corgnet et al, 2013;Bossaerts et al, 2010).…”

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confidence: 97%

“…Hence, arbitrage between risk and ambiguity was not possible. Although less subjects chose to submit a bid in the ambiguous market, Kocher and Trautmann (2013) found no dierences in the average transaction prices of risky and ambiguous assets.In a recent study, Corgnet et al (2013) modeled and experimentally tested a market with ambiguity averse traders. In their model, the market is divided into three categories: a proportion of rational traders who are ambiguity neutral; a proportion of noise traders who buy or sell the asset independent of the fundamentals; and a proportion of ambiguity-averse traders who maximize the 6 The authors acknowledge that this is unexpected, as simultaneous auctions allow for arbitrage: It seems that a more transparent comparison between the unambiguous and ambiguous assets leads to a greater dierential in market prices (simultaneous versus independent) contrary to our expectation (Sarin and Weber, 1993, p.612).…”

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confidence: 99%

“…By displaying both markets on the same screen, we increase the comparability and salience of ambiguity, which has been shown to pronounce ambiguity aversion (Fox and Tversky, 1995;Chow and Sarin, 2001;Fox and Weber, 2002; Qiu and Weitzel, 2011 13 Corgnet et al (2013) estimate that the eect of ambiguity on trading behavior is likely to be limited if less than 1 /3 of the population is ambiguity averse. Based on their model they show that a proportion of 32% ambiguity-averse traders (with 33% noise traders instead of ambiguity-seeking traders, and 35% ambiguity-neutral traders) translates into an average ambiguity premium of at most 6%.…”

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Does ambiguity aversion survive in experimental asset markets?

Füllbrunn

Rau

Weitzel

2014

Journal of Economic Behavior & Organization

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Although a number of theoretical studies explain empirical puzzles in nance with ambiguity aversion, it is not a given that individual ambiguity attitudes survive in markets. In fact, despite ample evidence of ambiguity aversion in individual decision making, most studies nd no or only limited ambiguity aversion in experimental nancial markets, even when they exclude arbitrage. We argue that ambiguity eects in markets depend on market feedback and on a suciently strong bias toward ambiguity among the participants. Accordingly, we nd signicant ambiguity eects in lowfeedback call markets for assets that provoke high ambiguity aversion, but no ambiguity eects in high-feedback double auctions. * Radboud University Nijmegen, IMR, Department of Economics, Thomas van Aquinostraat 5, 6525 GD Nijmegen, The Netherlands † Universität Erlangen-Nürnberg, Lehrstuhl für Volkswirtschaftslehre, insbesondere Wirtschaftstheorie, Lange Gasse 20, 90403 Nürnberg, Germany ‡ Radboud University Nijmegen, IMR, Department of Economics, Thomas van Aquinostraat 5, 6525 GD Nijmegen, The Netherlands (u.weitzel@fm.ru.nl) § We thank seminar participants at the ESA World Meeting in New York (2012), the Experimental Finance Conference in Luxembourg (2012), and the ESA European Meeting in Cologne (2012) for helpful comments. All remaining errors are ours. 1Electronic copy available at: http://ssrn.com/abstract=2227335 IntroductionMany real-life decisions are characterized by ambiguity, in which we lack important information such as the objective probabilities of the relevant states.Keynes (1921) proposed a simple thought experiment to illustrate the eects of ambiguity.Imagine [...] the two cases following of balls drawn from an urn. In each case we require the probability of drawing a white ball;in the rst case we know that the urn contains black and white in equal proportions; in the second case the proportions of each color is unknown, and each ball is as likely to be black as white. It is evident that in either case the probability of drawing a white ball is 1 /2, but that the weight of the argument in favor of this conclusion is greater in the rst case. (Keynes, 1921, Chapter VI.6) 1 Ellsberg (1961) used this experimental design, commonly referred to as the '2-color Ellsberg urn' to show that a preference for the risky urn (with measurable probabilities) over the ambiguous urn (with immeasurable probabilities) violates the Subjective Expected Utility Theory and the Sure-thing Principle of the Savage axioms (Savage, 1954). Since then a large body of individual choice experiments have conrmed that, on average, decision makers are 'ambiguity averse' when confronted with the above-quoted choice. 2In a recent survey of the experimental literature, Trautmann and Van De Kuilen (forthcoming) conclude that there is clear evidence that on the average, and across various elicitation methods, ambiguity aversion is the typical qualitative nding.Ambiguity aversion is a possible cause for a number of empirical puzzles in nancial economics, wh...

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confidence: 97%

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confidence: 99%

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confidence: 99%

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Does ambiguity aversion survive in experimental asset markets?

Füllbrunn

Rau

Weitzel

2014

Journal of Economic Behavior & Organization

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“…Füllbrunn, Rau, et Weitzelc (2014) trouvent que les effets de l'ambiguïté sur les marchés expérimentaux dépendent grandement de la rétroaction dont bénéficient ou non les sujets. Corgnet, Kujal et Porter (2012) proposent un protocole expérimental dans lequel l'information arrive de manière séquentielle. Les résultats de leur expérience vont à l'encontre d'un certain nombre de théories évoquées ci-dessus : il n'existe pas de prime d'ambiguïté dans le prix des actifs, le volume d'échange n'est pas affecté par l'ambiguïté et les prix d'actifs ne sont pas plus volatiles en présence d'ambiguïté.…”

Section: éTudes Expérimentalesunclassified

Ambiguïté, comportements et marchés financiers

Jeleva

Tallon

2017

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Nous proposons une revue de la littérature récente centrée sur les effets de l’ambiguïté (ou incertitude non probabilisée) sur les comportements des acteurs sur les marchés financiers et sur le fonctionnement de ces derniers. Nous exposons les mécanismes théoriques de choix de portefeuille et de formation de prix d’actifs essentiellement, qui diffèrent de ceux reposant sur des modélisations usuelles en termes d’espérance d’utilité. Nous proposons aussi une revue des résultats empiriques et expérimentaux qui viennent illustrer voire étayer les prédictions théoriques décrites.

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“…Prices are greater than the expected dividend value in all treatments. Corgnet et al (2013) consider the effect of ambiguous, and sequentially released, information regarding the dividend distribution. Their markets consist of three periods where information was provided at the conclusion of the first and second periods about the asset's dividend that would be determined at the end of the third period.…”

Section: Public Information Releasementioning

confidence: 99%