Are Risk Premium Anomalies Caused by Ambiguity

摘要: Numerous studies have provided evidence of two equity return anomalies in recent years. The “risk-premium puzzle” is the anomaly that returns been excessive relative to risk. “small-firm effect” risk premiums on small-cap stocks large-cap stocks. We present unique both these may be caused by presence ambiguity. More generally, we propose current conceptions are too limited explain and, therefore, distinction between and uncertainty developed Frank Knight approximately 80 years ago revisited. As numerous other found, traditional sense primarily a function possibility incurring loss. Uncertainty (ambiguity) directly related lack information confidence estimating future distributions possible