We study the predictability of cross-sectional uncertainty (CSU) proposed by Dew-Becker and Giglio (2021) for stock returns. We find that CSU exhibits significant power for predicting monthly stock returns with annual out-of-sample R^2 of 6.34%, greater than popular predictors. CSU generates...

Accounting for ambiguity aversion in dynamic decisions generally implies that either dynamic consistency or consequentialism must be given up. To gain insight into which of these principles better describes people's preferences we tested them using a variation of Ellsberg's three-color urn...