This paper considers an equilibrium asset pricing model in a static pure exchange economy under ambiguity. Ambiguity preference is represented by the dual theory of the smooth ambiguity model [6]. We show the existence and the uniqueness of the equilibrium in the economy and derive the state price density (SPD). The equilibrium excess return, which can be seen as an extension of the capital asset pricing model (CAPM) under risk to ambiguity, is derived from the SPD. We also determine the effects of ambiguity preference on the excess returns of ambiguous securities through comparative statics of the SPD.
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