In real world situations the fundamental value of an asset is ambiguous. Recent theory has incorporated ambiguity in the dividend process and the information observed by investors, and studied its effect on asset prices. In this paper we experimentally study trader reaction to ambiguity when dividend information is revealed sequentially. Price changes are consistent with news revelation regarding the dividend regardless of subject experience and the degree of ambiguity. Further, there is no under or over price reactions to news. Regardless of experience, market reaction to news moves in line with fundamentals. Also, no significant differences are observed in the control versus ambiguity treatments regarding prices, price volatility and volumes for experienced subjects. Our results indicate that the role of ambiguity aversion in explaining financial anomalies is limited.
Corgnet, B., Kujal, P., & Porter, D. (2011). Reaction to public information in markets: How much does ambiguity matter?. ESI Working Paper 11-01. Retrieved from http://digitalcommons.chapman.edu/esi_working_papers/107