Abstract
We conducted quasi-field experiments in Chinese brokerage houses to investigate how investors react to ambiguity relative to quantifiable risks and the degree of heterogeneity in these reactions. Our experiment consists of three sections; a background survey; individual self-reports of emotional states; and a series of individual portfolio choice questions involving ambiguous assets and assets with a known probability of success. We calculate an index of ambiguity aversion that controls for risk aversion through a series of simple choices and demonstrate its outside validity. We find a significant degree of heterogeneity in ambiguity attitudes and discuss some demographic or emotional factors that might contribute to this heterogeneity. We also discuss the correlation between ambiguity attitudes and risk attitudes. By conducting these experiments in China, we were able to measure the degree of ambiguity aversion among a sample of experienced and accessible investors who face ambiguous decisions on a daily basis.
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Funding was provided by the Russell Sage Foundation and an NSF dissertation grant for Bei Zhang. We would like to thank Andrew Schotter, Guillaume Frechette, and Kfir Eliaz for many helpful discussions. Yan Chen, Yaw Nyarko, Chloe Tergiman, and Neslihan Uler also provided crucial feedback. Any errors that remain are our own.
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Potamites, E., Zhang, B. Heterogeneous ambiguity attitudes: a field experiment among small-scale stock investors in China. Rev Econ Design 16, 193–213 (2012). https://doi.org/10.1007/s10058-012-0125-7
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DOI: https://doi.org/10.1007/s10058-012-0125-7