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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/31587
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| Title: | Pricing Systematic Ambiguity in Capital Markets |
| Authors: | Brenner, Menachem
Izhakian, Yehuda |
| Issue Date: | 26-Jul-2012 |
| Series/Report no.: | FIN-12-008 |
| Abstract: | Asset pricing models assume that probabilities of future outcomes are
known. In reality, however, there is ambiguity with regard to these
probabilities. Accounting for ambiguity in asset pricing theory results
in a model with two systematic components, beta risk and beta ambiguity.
The focus of this paper is to study the empirical implications of
ambiguity for the cross section of equity returns. We find that
systematic ambiguity is an important determinant of equity returns. We
also find that the Fama-French factors contribute to the explanatory
power of the two main drivers of returns; namely, systematic risk and
systematic ambiguity. |
| URI: | http://hdl.handle.net/2451/31587 |
| Appears in Collections: | Finance Working Papers
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