I study the effects of risk and ambiguity (Knightian uncertainty) on optimal portfolios and equilibrium asset prices … ambiguity leads to portfolio inertia and excess volatility. Specifically, when news is surprising, then investors may not react …

pricing models with smooth ambiguity. Statistical model comparison shows that models with ambiguity, learning and time … models featuring smooth ambiguity preferences. We rely on semi-nonparametric estimation of a flexible auxiliary model in our …

I study the effects of aversion to risk and ambiguity (uncertainty in the sense of Knight (1921)) on the value of the … ambiguity can explain high expected stock market returns and excess volatility and kurtosis of stock market returns. Moreover …

ambiguity aversion in the spirit of Klibanoff et al. (2005). I calibrate the model to the post-war US data. The main findings … volatility clusterng and persistence; and (3) Bayesian learning itself is unable to generate a significant and positive risk … premium once time variation in investment opportunities is accounted for; in most cases, Bayesian learning lowers the …