Ambiguity Preferences and Portfolio Choices: Evidence from the Field

Milo Bianchi (1) , Jean-Marc Tallon (2, 3)

1 TSE-R - Toulouse School of Economics
2 CES - Centre d'économie de la Sorbonne
3 PSE - Paris School of Economics

We investigate the empirical relation between ambiguity aversion, risk aversion and portfolio choices. We match administrative panel data on portfolio choices with survey data on preferences over ambiguity and risk. We report three main findings. First, conditional on participation, ambiguity averse investors hold riskier portfolios. Second, they rebalance their portfolio in a contrarian direction relative to the market. Accordingly, their exposure to risk is more stable over time. Third, their portfolios experience higher returns, but they are also more sensitive to market trends. In several instances, the effects of ambiguity aversion stand in sharp contrast with those of risk aversion.

Mots clés: Portfolio choice; Risk; Uncertainty

Domaines: Economies et finances

Milo Bianchi, Jean-Marc Tallon. Ambiguity Preferences and Portfolio Choices: Evidence from the Field. 2014. ⟨halshs-01109655⟩