Ambiguity, risk, and asset returns in continuous time

Models of utility in stochastic continuous-time settings typically assume that beliefs are represented by a probability measure, hence ruling out a priori any concern with ambiguity. This paper formulates a continuous-time intertemporal version of multiple-priors utility, where aversion to ambiguity is admissible. In a representative agent asset market setting, the model delivers restrictions on excess returns that admit interpretations reflecting a premium for risk and a separate premium for ambiguity.