The theory of subjective expected utility (SEU) has been extended in many recent works, allowing ambiguity to matter for choice. However, a fully satisfactory and general notion of ambiguity aversion, analogous to risk aversion for SEU, is still missing. Using a new preference model which...

This paper investigates the importance of financial institutions, particularly universal banks, in the pricing of risk in securities markets. Recent research on modern economies, finds that three factors explain the cross-section of average stock returns: (i) a stock's sensitivity to market-wide...