This paper assesses the quantitative impact of ambiguity on the historically observed equity premium. We consider a Lucas-tree pure exchange economy with a single agent where we introduce two key non-standard assumptions. First, the agent's beliefs about the dividend/consumption process is...

This paper assesses the quantitative impact of ambiguity on the historically observed equity premium. We consider a Lucas-tree pure–exchange economy with a single agent where we introduce two key non- standard assumptions. First, the agent's beliefs about the dividend/consumption process is...

We investigate consequences of ambiguity on efficient allocations in an exchange economy. Ambiguity is embodied in the model uncertainty perceived by the consumers: they are unsure what would be the appropriate probability measure to apply to evaluate consumption and keep in consideration a set...

This paper assesses the quantitative impact of ambiguity on historically observed financial asset returns and growth rates. The single agent, in a dynamic exchange economy, treats the conditional uncertainty about the consumption and dividends next period as ambiguous. We calibrate the agent's...

We review some of the (theoretical) economic implications of David Schmeidler's models of decision under uncertainty (Choquet expected utility and maxmin expected utility) in competitive market settings. We start with the portfolio inertia result of Dow and Werlang (1992), show how it does or...