Caution under Ambiguity and Blowups

We develop a way of ranking and scoring actively managed funds and investment strategies. Our performance measure accounts for the feature that investors may exhibit caution, via the mechanism of ambiguity aversion, when evaluating investment strategies. Linking developed theory to data, we feature evidence on a real-world question: Do investors gain by selling the tails of return distributions? Using data of options on (i) the S&P 500 equity index, and (ii) Treasury bond futures, our answer to this question is in the negative. We complement our evidence from options on STOXX 50, FTSE, and Nikkei equity indexes

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Year of publication:	[2022]
Authors:	Bakshi, Gurdip ; Crosby, John ; Gao, Xiaohui
Publisher:	[S.l.] : SSRN
Subject:	Theorie \| Theory \| Entscheidung unter Unsicherheit \| Decision under uncertainty \| Erwartungsnutzen \| Expected utility \| Lernprozess \| Learning process \| Risiko \| Risk

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