Investment, Resolution of Risk, and the Role of Affect
By Frans van Winden, M. Krawczyk, Astrid Hopfensitz. Social Science Research Network, 2011
114 citations recorded by the source corpus.
This experimental study is concerned with the impact of the timing of the resolution of risk on investment behavior, with a special focus on the role of affect. In a between-subjects design, we observe the impact of a substantial delay of risk resolution (2 days) on investment choices. Besides the resolution timing all other factors, including the timing of payout, are held constant across treatments. In addition, state-of-the-art experimental techniques from experimental economics and psychology are used for eliciting preferences and to explicitly measure emotions and personality traits. Participants put their own money at stake. Our main finding is that the timing of the resolution of risk matters for investment, modulated by the probability of investment success. Emotions are found to play a significant role in this respect and explain our main finding. Our results support recent models of decision making under risk trying to incorporate anticipatory emotions but also uncover some important shortcomings related to the dynamics of emotions.
Subfields: Finance, General Decision Sciences, Safety Research
View Paper: https://www.semanticscholar.org/paper/38f863920dcb1b72b5ad733ed8821e491d45284a
Citations in the corpus
- Stability of risk preference measures: results from a field experiment on French farmers (2012, unknown): “One should however be careful with this interpretation since the coefficient associated to the average CRRA class is not (20)Isaac and James (2000) find that risk attitudes differ between first price auctions and the Becker-DeGrootMarschak procedure.”
- Do Governments Tax Agglomeration Rents? (2013, unknown): “As described in Appendix A and a companion paper (Koh and Riedel (2009)), we consider the DO approach to be superior to other approaches for the identification of industry localization patterns, including a widelyused methodology developed by Ellison and Glaeser (1997) (henceforth EG).”
- Cheating, emotions, and rationality: an experiment on tax evasion (2010, unknown): “They have identified their influence on reciprocity (Ben-Shakhar et al., 2007), punishment (de Quervain et al., 2004), or investment decisions (van Winden et al., 2008). halshs-00462067, version 1 -30 Apr 2010 assume that emotions associated with reporting, audit, and sanctions inform and influence…”