Welfare Implications of Mitigating Investment Uncertainty

This paper explores the welfare implications of mitigating investment uncertainty in the context of Easley and O’Hara (2009) [Ambiguity and Nonparticipation: The Role of Regulation. Review of Financial Studies 22(5), 1817–1843]. While one may expect welfare gains to be had by encouraging participation in financial markets by ambiguity-averse investors, we formally show that it hurts other investors and is not Pareto-improving without appropriate income transfers.* Revised： [18-33, 2018