Comparative statics under κ-ambiguity for log-Brownian asset prices

This paper examines the comparative statics of optimal risky demand when economic agents are both risk averse and ambiguity averse. In a setting with log-Brownian asset prices and -ambiguity but virtually for all utility functions, we show that the greater the Arrow-Pratt coefficient of absolute risk aversion under ambiguity, the less the optimal demand for risky assets. This monotonic property is demonstrated with varying risk-free interest rate and allows for distinct estimated model parameters across agents.