Ellsberg's 2-color experiment, bid-ask behavior and ambiguity
Results in this note relate the observation of an interval of prices at which a DM strictly prefers to hold a zero position on an asset (termed 'bid-ask behavior') to the DM's perception of the underlying payoff relevant events as ambiguous, as the term is defined in Epstein and Zhang...
| Päätekijät: | , |
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| Aineistotyyppi: | Working paper |
| Julkaistu: |
University of Oxford
2002
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| _version_ | 1826278949834981376 |
|---|---|
| author | Mukerji, S Tallon, J |
| author_facet | Mukerji, S Tallon, J |
| author_sort | Mukerji, S |
| collection | OXFORD |
| description | Results in this note relate the observation of an interval of prices at which a DM strictly prefers to hold a zero position on an asset (termed 'bid-ask behavior') to the DM's perception of the underlying payoff relevant events as ambiguous, as the term is defined in Epstein and Zhang (2001). The connection between bid-ask behavior and ambiguity is established without invoking a parametric preference form, such as the Choquet expected utility or the max-min multiple priors model. This allows us to draw an observable distinction between bid-ask behavior that may arise purely due to first-order risk aversion type effects, such as those which could arise even if preferences were probabilistically sophisticated, and the bid-ask behavior that involve ambiguity perceptions. |
| first_indexed | 2024-03-06T23:51:33Z |
| format | Working paper |
| id | oxford-uuid:72c76002-1f0c-441c-8d8f-6da4e61a6cd6 |
| institution | University of Oxford |
| last_indexed | 2024-03-06T23:51:33Z |
| publishDate | 2002 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:72c76002-1f0c-441c-8d8f-6da4e61a6cd62022-03-26T19:52:15ZEllsberg's 2-color experiment, bid-ask behavior and ambiguityWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:72c76002-1f0c-441c-8d8f-6da4e61a6cd6Symplectic ElementsBulk import via SwordUniversity of Oxford2002Mukerji, STallon, JResults in this note relate the observation of an interval of prices at which a DM strictly prefers to hold a zero position on an asset (termed 'bid-ask behavior') to the DM's perception of the underlying payoff relevant events as ambiguous, as the term is defined in Epstein and Zhang (2001). The connection between bid-ask behavior and ambiguity is established without invoking a parametric preference form, such as the Choquet expected utility or the max-min multiple priors model. This allows us to draw an observable distinction between bid-ask behavior that may arise purely due to first-order risk aversion type effects, such as those which could arise even if preferences were probabilistically sophisticated, and the bid-ask behavior that involve ambiguity perceptions. |
| spellingShingle | Mukerji, S Tallon, J Ellsberg's 2-color experiment, bid-ask behavior and ambiguity |
| title | Ellsberg's 2-color experiment, bid-ask behavior and ambiguity |
| title_full | Ellsberg's 2-color experiment, bid-ask behavior and ambiguity |
| title_fullStr | Ellsberg's 2-color experiment, bid-ask behavior and ambiguity |
| title_full_unstemmed | Ellsberg's 2-color experiment, bid-ask behavior and ambiguity |
| title_short | Ellsberg's 2-color experiment, bid-ask behavior and ambiguity |
| title_sort | ellsberg s 2 color experiment bid ask behavior and ambiguity |
| work_keys_str_mv | AT mukerjis ellsbergs2colorexperimentbidaskbehaviorandambiguity AT tallonj ellsbergs2colorexperimentbidaskbehaviorandambiguity |