Building on a framework of heterogeneous uncertainty across the population, this paper provides a unified theoretical explanation for several salient features of household investment behavior: First, a fraction of households will choose not to participate in the stock market, with poorer...

This paper develops a tractable dynamic model of competition between two risk-averse portfolio managers who attempt to outperform each other by trading in different stocks, reflecting asset specialization. We characterize explicitly the unique Nash equilibrium portfolio policies, and show that a...

Ambiguity-seeking behavior is universally disregarded in a large theoretical finance literature with smooth ambiguity preferences. This paper questions the three rationales for this practice. First, smooth ambiguity models are not ill-defined under ambiguity-seeking. Second, a representative...