Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/150364
Authors: 
Ahn, David
Choi, Syngjoo
Gale, Douglas
Kariv, Shachar
Year of Publication: 
2014
Citation: 
[Journal:] Quantitative Economics [ISSN:] 1759-7331 [Volume:] 5 [Year:] 2014 [Issue:] 2 [Pages:] 195-223
Abstract: 
We report a portfolio-choice experiment that enables us to estimate parametric models of ambiguity aversion at the level of the individual subject. The assets are Arrow securities that correspond to three states of nature, where one state is risky with known probability and two states are ambiguous with unknown probabilities. We estimate two specifications of ambiguity aversion, one kinked and one smooth, that encompass many of the theoretical models in the literature. Each specification includes two parameters: one for ambiguity attitudes and another for risk attitudes. We also estimate a three-parameter specification that includes an additional parameter for pessimism/optimism (underweighting/overweighting the probabilities of different payoffs). The parameter estimates for individual subjects exhibit considerable heterogeneity. We cannot reject the null hypothesis of subjective expected utility for a majority of subjects. Most of the remaining subjects exhibit statistically significant ambiguity aversion or seeking and/or pessimism or optimism.
Subjects: 
Uncertainty
ambiguity aversion
risk aversion
pessimism/optimism
subjective expected utility
maxmin expected utility
»-maxmin expected utility
Choquet expected utility
contraction expected utility
recursive expected utility
recursive nonexpected utility
rank-dependent utility
experiment
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Article

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