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dc.contributor.authorBrenner, Menachem-
dc.contributor.authorIzhakian, Yehuda-
dc.description.abstractModern portfolio theory focuses on the relationship between risk and return, assuming away ambiguity, uncertainty over the probability space. This paper assumes that ambiguity affects asset prices and tests the relationship between risk, ambiguity and return based on a model developed by Izhakian (2011). Its contribution is twofold; it proposes an ambiguity measure that is derived theoretically and computed from stock market prices. Second, it uses ambiguity in conjunction with risk to test the basic relationship between risk, ambiguity and return. This paper finds that ambiguity has a consistently negative effect on returns and risk mostly has a positive effect.en
dc.rightsCopyright Yehuda Izhakian and Menachem Brenner, 2011en
dc.subjectKnightian uncertaintyen
dc.subjectEquity premiumen
dc.subjectAmbiguity measureen
dc.titleAsset Pricing and Ambiguity: Empirical Evidenceen
dc.typeWorking Paperen
Appears in Collections:Economics Working Papers

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