Abstract: Investors' perceived ambiguity of correlation explains the limited participation phenomenon in financial markets from a new perspective. In order to study how to reduce investors' ambiguity from market microstructure design and improve investors' participation, it is assumed that there are two financial markets in the economy:Market A with low and Market B with high perceived ambiguity. When the two risky assets are issued in different markets, investors' portfolio selections are different, so are the equilibrium status of the market and the equilibrium prices of the risky assets. Considering the listing costs and benefits, rational corporate managers will choose the market with higher equilibrium prices to issue their shares. In this paper it is found that the changes of factors, such as maximum correlation ambiguity and investor structure, have important influences on firm's listing choice. Thus, it is of great importance to reduce the investors' ambiguity by market microstructure design. Specific characteristics design aimed to enhance market transparency, such as stringent listing standard and adequate information disclosure, can reduce investors' correlation ambiguity and enhance their participation, thereby to improve the market liquidity and make the equilibrium price better reflect its fundamentals. It is also found that it is necessary to establish multi-level capital markets to finance firms with different characteristics.

Key words: ambiguity aversion, listing choice, issuing cost, sophisticated investors, naive investors