Ambiguity aversion / Behavioral finance / #behavioralinsights

Ambiguity aversion can be defined as our dislike for scenarios that involve choices where the probabilities of outcomes are unknown. We explain how it differs from risk aversion and discuss the Ellsberg paradox, which popularized this notion. Finally, we review the implications of ambiguity aversion through practical examples.

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0:00 Risky events vs ambiguous events
1:11 Ambiguity effect
1:29 Ellsberg paradox
3:00 Implications of ambiguity aversion
3:10 Example 1: Nonparticipation in capital markets
3:39 Example 2: Healthcare treatments
4:08 Example 3: Product reviews
5:08 Example 4: Shortened URLs
5:57 Summary

#behavioralfinance #behavioraleconomics #investing