The Distribution and Relevance of Ambiguity Attitudes

This paper analyzes the stability and distribution of ambiguity attitudes using a broad population sample. Using six waves of data, a structural stochastic choice model yields three individual-level parameters: ambiguity aversion, ambiguity-induced insensitivity, and the magnitude of decision errors. These parameters are heterogeneous across individuals, but stable over time and across the domains of financial markets and climate change. We summarize heterogeneity using a discrete classification approach with four types. We label these types as being near ambiguity neutral, ambiguity-averse, ambiguity-seeking, or erratic. Observed characteristics vary between groups in plausible ways. Ambiguity types predict risky asset allocation, even after controlling for covariates.