Ambiguity Attitudes in a Large Representative Sample

We introduce a tractable method for measuring ambiguity attitudes, which requires only three observations and five minutes per subject, and we apply this method in a large representative sample. In addition to ambiguity aversion, we confirm a-insensitivity, a new ambiguity component recently found in laboratory studies. A-insensitivity means that people insufficiently discriminate between different levels of likelihood, often treating all likelihoods as fifty-fifty, which results in the overweighting of extreme events. Our ambiguity measurements can predict real economic decisions of the subjects; specifically a-insensitivity has a negative relation with stock market participation and private business ownership. Surprisingly, ambiguity aversion is not significantly related to stock market participation, except under high ambiguity perception. Reference dependence can explain our findings, and provides a promising direction for future research on ambiguity. JEL Classification: D81, G11, D14, C83

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