Asset Pricing Implications of Ambiguity-sensitive Decision Models
Final Report Abstract
During the visit in Chapel Hill and since that, our research team has made significant progress. We found some interesting patterns in asset prices that help discriminate between the considered decision models in a unified intertemporal utility framework. A large scale GMM estimation exercise showed us how to choose realistic preference parameters when bringing the models to the data. The description of the methodological problems we encountered and solved will provide valuable guidance for future research when it comes to working with one of the decision models we consider. Moreover, our findings shed new light on the importance of choosing a particular decision model instead of another. This is important for the field of asset pricing as a whole.
