CEF.UP – FIN Seminar/Webinar

Thursday – November 9^th, 2023 at 1:00 p.m. | Room 305| Online

“Pricing ambiguity in the cross-section”

Han Ozsoylev  – Ozyegin University (joint with Sujoy Mukerji, Erkan M. Savran and Jean-Marc Tallon)

Abstract:

“We empirically test the implications of the theory of ambiguity aversion for the cross-section of stock returns. Our main findings indicate that exposure to systematic ambiguity is priced in the cross-section of stocks and that this pricing becomes more pronounced during times of high uncertainty, such as the days preceding the FOMC meeting announcements. We also find that ambiguity pricing can largely account for the beta anomaly. Our findings complement the recent developments in the macro-finance literature where ambiguity aversion has been shown to successfully address aggregate pricing puzzles such as the dynamics of equity premium and excess volatility.”