Gollier, Christian (2009) Portfolio Choices and Asset Prices: The Comparative Statics of Ambiguity Aversion. TSE Working Paper, n. 09-068

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We investigate the comparative statics of "more ambiguity aversion" as defined by Klibanoff, Marinacci and Mukerji (2005) in the context of the static two-asset portfolio problem. It is not true in general that more ambiguity aversion reduces the demand for the uncertain asset. We exhibit some sufficient conditions to guarantee that, ceteris paribus, an increase in ambiguity aversion reduces the demand for the ambiguous asset, and raises the equity premium. For example, this is the case when the set of plausible distributions of returns can be ranked according to the monotone likelihood ratio order. We also show how ambiguity aversion distorts the price kernel in the alternative portfolio problem with complete markets for contingent claims.

Item Type: Monograph (Working Paper)
Language: English
Date: July 2009
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 18 Jan 2012 06:00
Last Modified: 02 Apr 2021 15:36
OAI Identifier: oai:tse-fr.eu:21919
URI: https://publications.ut-capitole.fr/id/eprint/3222
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