The paper studies the impact of ambiguity on history-dependant beahviour in the standard microstructure model of financial markets. We show that differences in ambiguity attitudes between market makers and traders can generate contrarian and herding behaviour in stock markets where assets are...

This paper studies how updating affects ambiguity attitude. In particular we focus on generalized Bayesian updating of the Jaffray–Philippe sub-class of Choquet Expected Utility preferences. We find conditions for ambiguity attitude to be the same before and after updating. A necessary and...