Ambiguity, Ambiguity Aversion and Reserve of value in Argentina

Abstract

In this paper we studied the effects of ambiguity and ambiguity aversion on the demand for store of value assets in Argentina. Applying the approach of preferences for ambiguity in its static version (Klibanoff et al., 2005) to a conventional portfolio selection problem, two features of the demands of reserve assets in Argentina are rationalized: first, the dollarization of the demand for reserve assets of the private non-financial sector; second, the bias to demand real estate assets as a non-financial option to preserve the real value of wealth. We found that ambiguity can be a relevant factor to explain portfolio dollarization. Additionally, ambiguity aversion lowers the demand for assets denominated in US dollars and increases the demand for real estate as a store of value. From a methodological perspective, this paper seeks to promote the integration of preferences representation approaches which include ambiguity to study financial behavior in economies repeatedly exposed to volatile macroeconomic and financial contexts.

JEL classification: G10 ; G11 ; D14