Ambiguity,Its Measure In Financial Decisions And Applications In Investment Strategies

Uncertainty has always been the hot issues in the research field of finance,and uncertainty includes ambiguity and risk.Besides risk,Ambiguity is the key part of uncertainty.Ambiguity also plays an important role in financial decisions.When investors make daily decisions,they are faced with ambiguous financial environment.The set of ambiguity are more realistic than the set of classical risk hypothesis.In 1961 Ellsberg proposed the concepts of ambiguity and ambiguity aversion.After that,the theory of ambiguity has been applied more and more in the research field of economics and finance.At present,in the relative disadvantage of the international economic environment,China's economy in the new normal state needs to be restructured and upgraded and uncertainty is a basic characteristic of this process.Due to economic restructuring and industrial upgrading in the great uncertainty unpredictability,classical risk theory can not make a good explanation for reality.Therefore,if the factor of ambiguity was considered into financial decision model,there will be a strong practical and theoretical significance to understand the financial phenomenon in daily life.The focus of this paper is: first,the paper gives a review of the theoretical and empirical researches on the concept of ambiguity,the theoretical explanation for ambiguity and the applications of ambiguity theory home and abroad in order to lay a theoretical foundation and research direction for the following chapters.Next,the degree of ambiguity can be measured by the volatility of probabilities.This paper proposes another new measure of ambiguity which is the value at ambiguity and proves that VaR is a special case of VaA.Then,this paper uses empirical analysis method with the data got from the questionnaire survey which is different from actual financial data.According to the questionnaire survey,the degree of sample individual's ambiguity aversion can be measured by a numerical value and multivariate linear regression method is applied to research the effect that ambiguity aversion make on the stock market participation and the investment portfolio strategy.At last,this paper uses the numerical method of maximum likelihood estimation with the trading data of four public companies including China Life and Citic Securities in A-share and H-share stock market and researches the effect that ambiguity aversion make on investment strategy of investors.The optimal investment strategy is obtained under ambiguity in this paper.This paper also proposes another new measure of ambiguity,value at ambiguity which has more realistic signifcance than VaR.This paper proves that VaR is a special case of VaA.According to the regression result,this paper also finds a negative correlation between the degree of participation in stock market and ambiguity,proving that ambiguity indeed can affect the portfolio strategy of investors.By maximum likelihood estimation method,the regression result proves that ambiguity can affect the investment strategy of A-shares and H-shares of Huaneng International,China Life,Citic Securities and Minsheng Bank.And the optimal investment strategy is obtained under ambiguity in this paper.This paper has 5 parts: in chapter 1 some research backgrounds and main contributions and research approaches are introduced;chapter 2 is the literature review,which mainly introduces progress and dynamics of research about ambiguity,utility model of ambiguity and measures of ambiguity;chapter 3 proves the method valid and proposes the theory of value at ambiguity(VaA);chapter 4 multivariate regression method is applied to research the effect that ambiguity aversion make on the stock market participation and the impact on the investment strategy;chapter 5 uses the numerical method of maximum likelihood estimation and genetic algorithm with the trading data of four public companies in A-share and H-share stock market and researches the effect that ambiguity aversion make on investment strategy of investors.It finds that a negative correlation between the degree of participation in stock market and ambiguity,proving that ambiguity indeed can affect the portfolio strategy of investors.The higher the degree of ambiguity aversion,resulting in less proportion of stock investment.