Finance and Financial Management Commons^™

Ambiguity Aversion And Experiential Learning: Implications For Long-Term Savings Decisions, Bryan Foltice, Rachel Rogers

Scholarship and Professional Work - Business

This paper evaluates potential methods for reducing ambiguity surrounding returns on equity to improve long-term savings decisions. We evaluate 221 undergraduate students in the U.S. and first assess the degree of ambiguity aversion exhibited by individuals in the sample population as they decide between a risky (known probability) option and ambiguous (unknown probability) option pertaining to their chances of winning $0 or $1 in a hypothetical lottery. Allowing participants to experience the underlying probability through sampling significantly influences behavior, as participants were more likely to select the ambiguous option after sampling. Similarly, we test whether sampling historical return data through …