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Reaction to Public Information in Markets: How much does Ambiguity Matter?


  • Corresponding author: Praveen Kujal, Department of Economics, Universidad Carlos III de Madrid, C./Madrid, 126, Getafe 28903, Madrid, Spain. Email:

  • The authors acknowledge financial support from grant ECO2008-00977 and 2012/00103/001 from the Spanish Ministry of Education. Kujal acknowledges financial support from the Instituto Universitario de Economía, Consolider-Ingenio 2010 and the Comunidad de Madrid (grant Excelecon).


In this article, we experimentally study trader reaction to ambiguity when dividend information is revealed sequentially. Our results indicate that the role of ambiguity aversion in explaining financial anomalies is limited. Specifically, price changes are consistent with news revelation regarding the dividend, independent of subject experience and the degree of ambiguity. In addition, there is no under or overprice reactions to news. Regardless of experience, market reaction to news moves in line with fundamentals. We find no significant differences in the control versus ambiguity treatments regarding prices, price volatility and trading volume for experienced subjects.