Dear colleagues, The Department of Economics cordially invites you to the WU Economic Research Seminar (Department Seminar) on Wednesday, October 24, with Christoph Kuzmics (Karl Franzens University of Graz) on "Limit Orders under Knightian Uncertainty" Abstract: It is a well known fact that a large proportion of individuals do not participate in the stock market. Dow and Werlang (ECMA 1992) provide an explanation of this observation that is based on these individuals being ambiguity averse. More specifically, they show that an ambiguity averse investor's demand function for a financial asset can be such that for a wide range of possible prices of this asset the DM neither buys nor shortsells the asset, which is not possible for the demand function of a subjective expected utility (SEU) maximizing investor. The demand function that Dow and Werlang construct is purely hypothetical in that it is the truthful answer to the question as to what the investor would hypothetically do as a function of all potential prices. Suppose that we instead ask the ambiguity averse investor to submit a limit order, i.e., a function from prices to choices, before the price realizes and suppose we insist that all prices could potentially realize. I show that in such a model we either find that ambiguity averse investors, along with SEU investors, also fully participate in the stock market (in the sense of Dow and Werlang) or that SEU investors, along with ambiguity averse investors, also do not participate in the stock market. Ambiguity aversion can, therefore, no more and no less explain the observed stock market non-participation than the SEU model. Time and place: Wednesday, October 24, 4.30 – 6.00 p.m., Campus WU, Welthandelsplatz 1, 1020 Vienna, building D4, entrance A, 2nd floor, Department meeting room 2.008. With best regards, Harald Oberhofer --- Univ.-Prof. Dr. Harald Oberhofer Institute for International Economics WU Vienna University of Economics and Business Phone: +43/1/31336-4984 Fax: +43/1/31336-4984 Email: harald.oberhofer@wu.ac.at<mailto:harald.oberhofer@wu.ac.at> Webpage: https://www.wu.ac.at/ie/mitarbeiter/harald-oberhofer/ Austrian Institute of Economic Research (WIFO) Phone: +43/1/7982601-468 Fax: +43/1/7989386 Email: harald.oberhofer@wifo.ac.at<mailto:harald.oberhofer@wifo.ac.at> Webpage: http://www.wifo.ac.at/harald_oberhofer