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Roy Kouwenberg (Mahidol University), "Ambiguity aversion and household portfolio choice puzzles: Empirical evidence".
We test the relation between ambiguity aversion and ﬁve household portfolio choice puzzles: nonparticipation in equities, low allocations to equity, home-bias, own-company stock ownership, and portfolio under-diversiﬁcation. In a representative US household survey, we measure ambiguity preferences using custom-designed questions based on Ellsberg urns. As theory predicts, ambiguity aversion is negatively associated with stock market participation, the fraction of ﬁnancial assets in stocks, and foreign stock ownership, but it is positively related to own-company stock ownership. Conditional on stock ownership, ambiguity aversion is related to portfolio under-diversiﬁcation, and during the ﬁnancial crisis, ambiguity-averse respondents were more likely to sell stocks.
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