Market Ambiguity Attitude Restores the Risk-Return Trade-Off
References
- (2012) Regime changes and financial markets. Annu. Rev. Financial Econom. 4:313–337.Crossref, Google Scholar
- (2022) Optimal investment and equilibrium pricing under ambiguity. Preprint, submitted June 21, https://arxiv.org/abs/2206.10489.Google Scholar
- (2019) Cumulative prospect theory, option returns, and the variance premium. Rev. Financial Stud. 32(9):3667–3723.Crossref, Google Scholar
- (1990) Stock returns and volatility. J. Financial Quant. Anal. 25(3):203–214.Crossref, Google Scholar
- (2015) Testing ambiguity models through the measurement of probabilities for gains and losses. Amer. Econom. J. Microeconomics 7(2):77–100.Crossref, Google Scholar
- (2018) The effect of learning on ambiguity attitudes. Management Sci. 64(2):2181–2198.Link, Google Scholar
- (2006) Investor sentiment and the cross-section of stock returns. J. Finance 61(4):1645–1680.Crossref, Google Scholar
- (2016) Risk, uncertainty, and expected returns. J. Financial Quant. Anal. 51(3):707–735.Crossref, Google Scholar
- (2011) Maxing out: Stocks as lotteries and the cross-section of expected returns. J. Financial Econom. 99(2):427–446.Crossref, Google Scholar
- (2004) Risks for the long run: A potential resolution of asset pricing puzzles. J. Finance 59(4):1481–1509.Crossref, Google Scholar
- (2021) Prospect theory and stock market anomalies. J. Finance 76(5):2639–2687.Crossref, Google Scholar
- (2006) Rare disasters and asset markets in the twentieth century. Quart. J. Econom. 121(3):823–866.Crossref, Google Scholar
- (2021) Rare disaster probability and options pricing. J. Financial Econom. 139(3):750–769.Crossref, Google Scholar
- (2024) The risk–return tradeoff among equity factors. J. Empirical Finance 78(September):101518.Google Scholar
- (2022) Testing for time-varying Granger causality. Stata J. 22(2):355–378.Crossref, Google Scholar
- (2014) The VIX, the variance premium and stock market volatility. J. Econometrics 183(2):181–192.Crossref, Google Scholar
- (2022) The time variation in risk appetite and uncertainty. Management Sci. 68(6):3975–4004.Link, Google Scholar
- (1986) Generalized autoregressive conditional heteroskedasticity. J. Econometrics 31(3):307–327.Crossref, Google Scholar
- (2010) Ambiguity in asset markets: Theory and experiment. Rev. Financial Stud. 23(4):1325–1359.Crossref, Google Scholar
- (2004) On the relationship between the conditional mean and volatility of stock returns: A latent VAR approach. J. Financial Econom. 72(4):217–257.Crossref, Google Scholar
- (2004) Estimation and test of a simple model of intertemporal capital asset pricing. J. Finance 59(4):1743–1776.Crossref, Google Scholar
- (2018) Asset pricing and ambiguity: Empirical evidence. J. Financial Econom. 130(3):503–531.Crossref, Google Scholar
- (1987) Stock returns and the term structure. J. Financial Econom. 18(2):373–399.Crossref, Google Scholar
- (1999) By force of habit: A consumption-based explanation of aggregate stock market behavior. J. Political Econom. 107(2):205–251.Crossref, Google Scholar
- (1992) No news is good news: An asymmetric model of changing volatility in stock returns. J. Financial Econom. 31(3):281–318.Crossref, Google Scholar
- (2008) Predicting excess stock returns out of sample: Can anything beat the historical average? Rev. Financial Stud. 21(4):1509–1531.Crossref, Google Scholar
- CBOE (2011) The CBOE SKEW Index®SM – SKEW®SM. Accessed November 11, 2023, https://cdn.cboe.com/resources/indices/documents/SKEWwhitepaperjan2011.pdf.Google Scholar
- (2023) On the economic significance of stock return predictability. Rev. Finance 27(2):619–657.Crossref, Google Scholar
- (2007) Choice under uncertainty with the best and worst in mind: Neo-additive capacities. J. Econom. Theory 137(1):538–567.Crossref, Google Scholar
- (2002) Ambiguity, risk, and asset returns in continuous time. Econometrica 70(4):1403–1443.Crossref, Google Scholar
- (2007) Approximately normal tests for equal predictive accuracy in nested models. J. Econometrics 138(1):291–311.Crossref, Google Scholar
- (2024) A multifactor perspective on volatility-managed portfolios. J. Finance 79(6):3859–3891.Google Scholar
- (2015) Estimating ambiguity preferences and perceptions in multiple prior models: Evidence from the field. J. Risk Uncertainty 51(3):219–244.Crossref, Google Scholar
- (2016) Ambiguity aversion and household portfolio choice puzzles: Empirical evidence. J. Financial Econom. 119(3):559–577.Crossref, Google Scholar
- (1992) Uncertainty aversion, risk aversion, and the optimal choice of portfolio. Econometrica 60(1):197–204.Crossref, Google Scholar
- (2009) Ambiguity and nonparticipation: The role of regulation. Rev. Financial Stud. 22(5):1817–1843.Crossref, Google Scholar
- (2025) Skewness preferences in choice under risk. Preprint, submitted January 9, https://dx.doi.org/10.2139/ssrn.3480519.Google Scholar
- Epstein LG, Wang T (1994) Intertemporal asset pricing under Knightian uncertainty. Econometrica 62(4):283–322.Google Scholar
- (2018) Choosing factors. J. Financial Econom. 128(2):234–252.Crossref, Google Scholar
- (2011) Forecasting stock market returns: The sum of the parts is more than the whole. J. Financial Econom. 100(3):514–537.Crossref, Google Scholar
- (1987) Expected stock returns and volatility. J. Financial Econom. 19(1):3–29.Crossref, Google Scholar
- (1948) The utility analysis of choices involving risk. J. Political Econom. 56(4):279–304.Crossref, Google Scholar
- (2004) Differentiating ambiguity and ambiguity attitude. J. Econom. Theory 118(2):133–173.Crossref, Google Scholar
- (2005) There is a risk-return trade-off after all. J. Financial Econom. 76(3):509–548.Crossref, Google Scholar
- (2021) Five facts about beliefs and portfolios. Amer. Econom. Rev. 111(5):1481–1522.Crossref, Google Scholar
- (1989) Maxmin expected utility with non-unique prior. J. Math. Econom. 18(2):141–153.Crossref, Google Scholar
- (2021) Cognition, optimism and the formation of age-dependent survival beliefs. Internat. Econom. Rev. 62(2):887–918.Crossref, Google Scholar
- (2002) The aggregate credit spread and the business cycle. Internat. Rev. Financial Anal. 11(2):219–227.Crossref, Google Scholar
- (2006) Uncovering the risk–return relation in the stock market. J. Finance 61(3):1433–1463.Crossref, Google Scholar
- (1989) A new approach to the economic analysis of nonstationary time series and the business cycle. Econometrica 57(2):357–384.Crossref, Google Scholar
- (2001) Robust control and model uncertainty. Amer. Econom. Rev. 91(2):60–66.Crossref, Google Scholar
- (2020) What drives risk perception? A global survey with financial professionals and laypeople. Management Sci. 66(9):3977–4002.Link, Google Scholar
- (2016) Speculative betas. J. Finance 71(5):2095–2144.Crossref, Google Scholar
- (2021) An augmented q-factor model with expected growth. Rev. Finance 25(1):1–41.Crossref, Google Scholar
- (2021) Are disagreements agreeable? Evidence from information aggregation. J. Financial Econom. 141(1):83–101.Crossref, Google Scholar
- (2019) Average skewness matters. J. Financial Econom. 134(1):29–47.Crossref, Google Scholar
- (2012) Ambiguity, learning, and asset returns. Econometrica 80(2):559–591.Crossref, Google Scholar
- (1994) Dynamic linear models with Markov-switching. J. Econometrics 60(1–2):1–22.Crossref, Google Scholar
- (2005) A smooth model of decision making under ambiguity. Econometrica 73(6):1849–1892.Crossref, Google Scholar
- (2018) Ambiguity aversion is not universal. Eur. Econom. Rev. 101(1):268–283.Crossref, Google Scholar
- (2023) A test of (weak) certainty independence. J. Econom. Theory 209(April):105623.Crossref, Google Scholar
- (2010) Investor sentiment and the stock market’s reaction to monetary policy. J. Banking Finance 34(1):139–149.Crossref, Google Scholar
- (2010) Measuring and modeling variation in the risk-return trade-off. Aït-Sahalia Y, Hansen LP, eds. Handbook of Financial Econometrics: Tools and Techniques (North Holland, Amsterdam), 617–690.Google Scholar
- (2016) What predicts US recessions? Internat. J. Forecasting 32(4):1138–1150.Crossref, Google Scholar
- (2007) The risk return tradeoff in the long run: 1836–2003. J. Financial Econom. 85(1):123–150.Crossref, Google Scholar
- (2017) What is the expected return on the market? Quart. J. Econom. 132(1):367–433.Crossref, Google Scholar
- (1985) The equity premium: A puzzle. J. Monetary Econom. 15(2):145–161.Crossref, Google Scholar
- (1969) Lifetime portfolio selection under uncertainty: The continuous-time case. Rev. Econom. Statist. 51(3):247–257.Crossref, Google Scholar
- (1973) An intertemporal capital asset pricing model. Econometrica 41(5):867–887.Crossref, Google Scholar
- (1980) On estimating the expected return on the market: An exploratory investigation. J. Financial Econom. 8(4):323–361.Crossref, Google Scholar
- (2017) Volatility-managed portfolios. J. Finance 72(4):1611–1644.Crossref, Google Scholar
- (1991) Conditional heteroskedasticity in asset returns: A new approach. Econometrica 59(2):347–370.Crossref, Google Scholar
- (1987) A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica 55(3):703–708.Crossref, Google Scholar
- (2020) Political cycles and stock returns. J. Political Econom. 128(11):4011–4045.Crossref, Google Scholar
- (2008) Estimating the intertemporal risk–return tradeoff using the implied cost of capital. J. Finance 63(6):2859–2897.Crossref, Google Scholar
- (2013) Forecasting stock returns. Elliott G, Timmermann A, eds. Handbook of Economic Forecasting, vol. 2A (Elsevier, Amsterdam), 328–383.Google Scholar
- (1989) Subjective probability and expected utility without additivity. Econometrica 57(3):571–587.Crossref, Google Scholar
- (2007) Institutional and individual sentiment: Smart money and noise trader risk? Internat. J. Forecasting 23(1):127–145.Crossref, Google Scholar
- (1987) The proof and measurement of association between two things. Amer. J. Psych. 100(3–4):441–471.Crossref, Google Scholar
- (2015) Ambiguity in the cross-section of expected returns: An empirical assessment. J. Bus. Econom. Statist. 33(3):418–429.Crossref, Google Scholar
- (2013) Can time-varying risk of rare disasters explain aggregate stock market volatility? J. Finance 68(3):987–1035.Crossref, Google Scholar
- (2010) Prospect Theory: For Risk and Ambiguity (Cambridge University Press, Cambridge, UK).Crossref, Google Scholar
- (2008) A comprehensive look at the empirical performance of equity premium prediction. Rev. Financial Stud. 21(4):1455–1508.Crossref, Google Scholar
- (1994) Time variations and covariations in the expectation and volatility of stock market returns. J. Finance 49(2):515–541.Crossref, Google Scholar
- (2011) Disagreement and return predictability of stock portfolios. J. Financial Econom. 99(1):162–183.Crossref, Google Scholar
- (2011) Investor sentiment and the mean–variance relation. J. Financial Econom. 100(2):367–381.Crossref, Google Scholar
- (2018) Variance risk premia, asset predictability puzzles, and macroeconomic uncertainty. Annu. Rev. Financial Econom. 10:481–497.Crossref, Google Scholar
- (2012) Asset pricing in a Lucas fruit-tree economy with the best and worst in mind. J. Econom. Dynam. Control 36(4):610–628.Crossref, Google Scholar

