Ambiguity aversion and heterogeneity in financial markets: An empirical and theoretical perspective

B. Pataracchia

Research output: ThesisDoctoral Thesis

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Abstract

The financial crisis has warned modelers and policy makers about the inadequacy of existing macroeconomic models in explaining financial facts and in supporting the analysis of policies’ impact. This thesis assesses the contribution of assuming heterogeneity among investors and deviation from the rational expectations framework in order to explain the complex interlinkages between macroeconomic aggregates and financial risk. Chapter 2 provides an empirical analysis of a representative-investor consumption based asset pricing model with recursive ambiguity adverse preferences. Chapter 3 assesses the theoretical implications of ambiguity averse preference in the presence of time-varying perceived risk. Finally, the last chapter presents an asset pricing model with heterogeneous ambiguity attitudes showing that their interaction is able to reproduce the waves of optimism and pessimism observed in the asset prices series.
Original languageEnglish
QualificationDoctor of Philosophy
Awarding Institution
  • Tilburg University
Supervisors/Advisors
  • Melenberg, Bertrand, Promotor
Award date27 May 2013
Place of PublicationTilburg
Publisher
Print ISBNs9789056683535
Publication statusPublished - 2013

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