A Study Of The Impact Of Ambiguity Aversion On Investor Behavior And Stock Selection Timing Strategies

In real financial markets,most of investors’ investment decisions are made under uncertainty.Knight(1921)distinguishes uncertainty into risk and ambiguity.Faced with an ambiguous environment,investors tend to exhibit ambiguity aversion.Ambiguity aversion refers to the fact that when people are faced with a situation with known probability and a situation with unknown probability but all other conditions are the same as the former,they prefer the latter,i.e.,the situation with known probability,which has an important impact on investors’ investment behavior and decisions.This phenomenon has been confirmed by numerous theoretical studies that ambiguity aversion can significantly influence investors’ investment behavior(e.g.,herd behavior,local preference,etc.)and stock selection strategies(e.g.,chasing,etc.).However,in a real-world setting,research on ambiguity aversion and decision making under ambiguity aversion attitudes lacks empirical evidence to support it.Based on the above background,this paper randomly selected 536 subjects by means of questionnaires and obtained data on individual investors’ investment information,ambiguous attitudes,investment behaviors and investment strategies through pre-experiments and formal experiments,tested the subjects’ ambiguity aversion attitudes by matching probabilities,and further explored the investment behaviors and stock selection and timing strategies of ambiguity aversion investors.The main conclusions of this paper are as follows:(1)From the perspective of investment behavior,ambiguity-averse investors have more pronounced herding behavior,less diversification and more preference for familiar stocks.(2)From the perspective of stock selection and timing strategies,ambiguity-averse investors prefer insurance stocks,value stocks and large-cap stocks,and prefer chasing and short-term timing strategies.Further,based on the above findings,we propose recommendations to raise investors’ awareness of irrational behavior and the risks it may cause,so that they can consciously think about whether they have irrational behavior and make conscious efforts to reduce it.The contributions of this paper are:(1)Most previous studies are based on assumptions such as rational man and complete market,and few have combined ambiguity aversion with investment behavior and strategy from the perspective of irrational behavior.To address this,this paper designs multiple rounds of ball-sampling experiments in a questionnaire survey to measure each investor’s ambiguity aversion attitude,and examines the relationship between ambiguity aversion and irrational behaviors such as herding behavior and investment non-diversification based on behavioral finance perspective,and combines them with investors’ investment behaviors and strategies.(2)This paper further expands on previous studies by using a non-experimental approach to enrich the research on investment behavior and stock selection timing strategies of ambiguity averse investors.To provide data support for analyzing and studying the impact of ambiguity aversion on individual investors’ investment behaviors and strategies,and to provide new perspectives for understanding investors’ specific stock investment behaviors and investment decisions.