Ambiguity and asset pricing: An empirical investigation for an emerging market

Date

2022-11-01

Author

Sahin, Baki Cem
Danışoğlu, Seza

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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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This study explores the impact of ambiguity on returns of both individual stocks and stock portfolios in an emerging market setting. First, an ambiguity index is derived and then the sensitivity of stock returns to am-biguity is analyzed while controlling for the other risk factors commonly cited in the literature. Results show that stocks with a high (low) sensitivity to ambiguity generate higher (lower) excess returns. These results are intuitive in the sense that investors seem to ask for lower returns from those stocks that serve as a natural hedge against ambiguity. Our findings are also in line with the earlier studies that provide similar evidence from the US stock markets.

Subject Keywords

Ambiguity, Asset pricing, Ambiguity index, CROSS-SECTION, STOCK RETURNS, EXPECTED UTILITY, COMMON-STOCKS, RISK, EQUILIBRIUM, LIQUIDITY, UNCERTAINTY, VALUATION, ANOMALIES

URI

https://hdl.handle.net/11511/99253

Journal

INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS

DOI

https://doi.org/10.1016/j.irfa.2022.102338

Collections

Department of Business Administration, Article

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Citation Formats

B. C. Sahin and S. Danışoğlu, “Ambiguity and asset pricing: An empirical investigation for an emerging market,” INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS, vol. 84, pp. 0–0, 2022, Accessed: 00, 2022. [Online]. Available: https://hdl.handle.net/11511/99253.