Ambiguity, High-Frequency Data and Asset Prices

Ambiguity plays a significant role in decision making, yet its exact definition and measurement eludes researchers. This study takes a practical approach to view ambiguity as volatility of probabilistic distributions in financial markets and proposes to measure it using high frequency stock price and order data that Borsa Istanbul provides. Once ambiguity is measured, we then test its impact on stock prices to distinguish it from risk. The project will be a major contribution to empirical studies on ambiguity aversion and its impact on financial markets.