Article2012

Reaction to Public Information in Markets: How much does Ambiguity Matter?

Brice Corgnet · Praveen Kujal · David Porter

51 citations0/0 files storedThe Economic Journal

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Financial Markets and Investment Strategies Decision-Making and Behavioral Economics Experimental Behavioral Economics Studies

Abstract

In this article, we experimentally study trader reaction to ambiguity when dividend information is revealed sequentially. Our results indicate that the role of ambiguity aversion in explaining financial anomalies is limited. Specifically, price changes are consistent with news revelation regarding the dividend, independent of subject experience and the degree of ambiguity. In addition, there is no under or overprice reactions to news. Regardless of experience, market reaction to news moves in line with fundamentals. We find no significant differences in the control versus ambiguity treatments regarding prices, price volatility and trading volume for experienced subjects.

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2019Theory of games and economic behavior 1993Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency 1921Risk, Uncertainty and Profit 1961Risk, Ambiguity, and the Savage Axioms 1985Does the Stock Market Overreact?1998Investor Psychology and Security Market Under‐ and Overreactions 1999By Force of Habit: A Consumption‐Based Explanation of Aggregate Stock Market Behavior n.d.A model of investor sentiment /

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