Abstract
We relate time-varying aggregate ambiguity about volatility (V-VSTOXX) to individual investor trading. We use the trading records of more than 100,000 individual investors from a large German online brokerage from March 2010 to December 2015. We find that an increase in ambiguity is associated with increased investor activity. It also leads to a reduction in risk-taking, which does not reverse over the following days. Ambiguity averse investors are more prone to ambiguity shocks. These results replicate when using the dispersion of professional forecasters as a long-term measure of ambiguity and are robust when controlling for newspaper- or market-based ambiguity measures.
Original language | English |
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Journal | Journal of Financial Economics |
Volume | 145 |
Issue | 1 |
Pages (from-to) | 277-296 |
Number of pages | 20 |
ISSN | 0304-405X |
DOIs | |
Publication status | Published - Jul 2022 |
Externally published | Yes |
Keywords
- Ambiguity
- Individual investor
- Risk-taking
- Trading behavior
- Uncertainty