Ambiguity aversion in dynamic models is motivated by the presence of unknown time-varying features, which agents do not understand and cannot theorize about. We analyze the consequences of this assumption for economic agents and model builders, who typically need to estimate a model, e.g., to...

This internet appendix provides additional derivations, results, and robustness checks to support the findings of the main paper.The paper "Ambiguity and Reality" to which this appendix applies is available at the following URL: "http://ssrn.com/abstract=1668569" http://ssrn.com/abstract=1668569

Model builders face ambiguity about the true data generating process. Consequently, they need to deal with ambiguity attitudes (inside uncertainty) and ambiguous financial reality (outside uncertainty) when developing and estimating financial models. We introduce a novel approach for...