Economics Seminar (2020-20)

Topic: Asset Pricing with Ambiguous Signals: An Experiment

Speaker: Te Bao, Nanyang Technology University

Time: Dec. 8,Tuesday.13:30p.m.- 15:00p.m. Beijing Time

Location: Microsoft Teams Online Conference Room Join the meeting

Abstract:

This paper explores how ambiguous signals and ambiguity aversioninfluence individuals’ expectations and the pricing of asset inexperimental financial markets. Inline with the theory of Epstein and Schneider (2008), we find that subjects’ degree of ambiguity aversion is positively correlated with their expectations about thevariance of ambiguous signals. These signals matter for the determination of assetprices. We find that price volatility is significantly larger underambiguous signals.Our findings provide evidence in support of the idea that ambiguous informationand ambiguity aversion may be a source of excess volatility in financial markets.

Introduction:

Te Bao is an assistant professor of economics at School of Social Sciences, Nanyang Technology University. His main research fields are experimental economics and behavioral finance. His published more than 20 papers in journals like Economic Journal, European Economic Review, Experimental Economics, Journal of Economics Behavior and Organization and Journal of Economic Dynamics and Control.

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