Knightian uncertainty and asset prices – is the title of the next in the series of public lectures organised by the Central Bank of Malta.

The speaker is Professor Sujoy Mukerji, Professor of Economics and Head of School, Queen Mary University of London.

This lecture will discuss recent developments in economics and finance on the theory of decision making under uncertainty.

These new theories are singularly useful in explaining and understanding the key facts of the 2008-12 credit crises and variations in asset prices.

Professor Sujoy Mukerji’s research has primarily been on decision making under ambiguity, its foundations and its relevance in economic contexts. His broader research interests lie in the intersection of bounded rationality and economic theory.

Ambiguity, or lack of good knowledge of probabilities affecting contingent outcomes of a chosen action, is pervasive in economic decision making. It is not particular to the ill- informed and less sophisticated, since it is often hard to distinguish (on the basis of historical data) between different models providing distinct (stochastic) forecasts of relevant financial variables. Hence, it can be prudent to choose actions that are robust to the uncertainty about the “correct” model.

His current projects include work on incorporating ambiguity into a general framework of dynamic games with incomplete information and applying the framework in economic contexts.

Some other projects involve analysis of portfolio holdings and trade in financial markets when market participants have heterogeneous attitudes to ambiguity. He has also recently worked on experimental investigation of decision theoretic models of ambiguity.

The lecture is taking place on Friday, the 15th of March, starting at 3pm, at the Central Bank of Malta, Binja Laparelli, Valletta. Admission is free, however registration beforehand is required on publicrelations@centralbankmalta.org

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