Impacts of Ambiguity Aversion and Information Uncertainty on Momentum: An International Study

Gong, Yujing; Wang, Mei; Dlugosch, Dennis

doi:10.1142/9789811221958_0016

Cited by 1 publication

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“…The second alternative index is compiled by the Global Learning and Observation to Benefit Environment (GLOBE) project, which extended Hofstede’s concept of five cultural dimensions to nine dimensions and thus provided a more comprehensive description of cultural attributes [ 52 ]. Thirdly, several researchers try to identify and measure the level of ambiguity aversion at the whole country level [ 18 , 36 , 53 ], the calculated national wide ambiguity aversion index in the study of [ 53 ] is used as the last alternative index.…”

Section: Sample Selection and Construction Of Variablesmentioning

confidence: 99%

“…The culture of uncertainty avoidance could explain home bias underdiversification when uncertainty avoidance is poxy of the individual's ambiguity aversion [32][33][34]. A prominent explanation in the literature on equity home bias is ambiguity aversion [32,33,35,36]. A long strand of the literature starting with Ellsberg (1961) [37] has shown that subjects are averse to ambiguity [38]; however, relative to the domestic stock market, foreign stocks are relatively ambiguous, and own-company stock is relatively unambiguous.…”

Section: Uncertainty Avoidance and Investment Underdiversificationmentioning

confidence: 99%

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Uncertainty avoidance and investment underdiversification

Tang

Zhou

2022

PLoS ONE

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The relationship between the cultural dimension of uncertainty avoidance and investment underdiversification is examined. A theoretical link between uncertainty avoidance and ambiguity is established, that is, cultural uncertainty avoidance captures the aversion attitude towards ambiguity at the national group level, thus, cultural dimension of uncertainty avoidance influences investors’ behavioral biases of home bias and the investment abroad concentration. The empirical results show that investment underdiversification is significantly and positively affected by the degree of uncertainty avoidance and robustness tests support this conclusion. A further analysis reveals that uncertainty avoidance moderates the effects of ambiguity on investment underdiversification, whereas the effects of uncertainty avoidance are mediated by the status quo bias.

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