We examine asset allocation decisions under smooth ambiguity aversion when an investor has a prior degree of belief in an asset pricing model (e.g., the domestic CAPM). Different from a Bayesian approach, the investor separately relies on the conditional distribution of returns and on the...

This paper explicitly solves, in closed form, the optimal consumption and port folio choice for an ambiguity averse investor in a Merton-type two assets economy where a risk premium follows a mean-reverting process. The investor's preferences are represented by the recursive multiple priors...

I develop a stochastic growth model with production where there is a hidden state governing productivity growth regimes, and the hidden state evolves according to a Markov chain. Economic agents learn about the hidden state and display ambiguity aversion in the spirit of Klibanoff et al. (2005)....

We propose a novel one-sector stochastic growth model, where producitivity growth follows a Markov-switching process with two regimes, and where households have generalized recursive smooth ambiguity preferences. The adopted class of preferences permits a three-way separation of risk aversion,...