Ambiguity about volatility and investor behavior

We relate time-varying aggregate ambiguity about volatility (V-VSTOXX) to individual investor trading. We use the trading records of more than 10 0,0 0 0 individual investors from a large German online brokerage from March 2010 to December 2015. We find that an increase in ambiguity is associated with increased investor activity. It also leads to a reduction in risk-taking, which does not reverse over the following days. Ambiguity averse investors are more prone to ambiguity shocks. These results replicate when using the dispersion of professional forecasters as a long-term measure of ambiguity and are robust when controlling for newspaper-or market-based ambiguity measures.(c) 2021 Elsevier B.V. All rights reserved.