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dc.contributor.authorIzhakian, Yehuda-
dc.description.abstractThis paper generalizes the mean–variance preferences to mean–variance–ambiguity preferences by relaxing the standard assumption that probabilities are known and assuming that probabilities are themselves random. It introduces a new measure of uncertainty, one that consolidates risk and ambiguity, which is employed for extending the CAPM from risk to uncertainty by incorporating ambiguity. This model makes the distinction between systematic ambiguity and idiosyncratic ambiguity and proves that the ambiguity premium is proportional to the systematic ambiguity. The merit of this model is twofold: first, it can be tested empirically; second, it can serve for measuring the performance of portfolios relative to their uncertainty.en
dc.rightsCopyright Yehuda Izhakian, 2012.en
dc.subjectShadow Theoryen
dc.subjectAmbiguity Measureen
dc.subjectUncertainty Measureen
dc.subjectAmbiguity premiumen
dc.subjectCapital Market Line (CML)en
dc.subjectCapital Asset Pricing Model (CAPM)en
dc.titleCapital Asset Pricing Under Ambiguityen
dc.typeWorking Paperen
Appears in Collections:Economics Working Papers

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