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Investment, Resolution of Risk, and the Role of Affect

Hopfensitz, Astrid, Krawczyk, Michal and Van Winden, Frans (2009) Investment, Resolution of Risk, and the Role of Affect. TSE Working Paper, n. 09-123

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Official URL: http://tse-fr.eu/pub/22246

Abstract

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.

Item Type: Monograph (Working Paper)
Language: English
Date: November 2009
Uncontrolled Keywords: investment decision, delayed resolution of risk, emotions
JEL codes: C91 - Laboratory, Individual Behavior
D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
G11 - Portfolio Choice; Investment Decisions
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 18 Jan 2012 06:01
Last Modified: 02 Oct 2019 23:00
OAI ID: oai:tse-fr.eu:22246
URI: http://publications.ut-capitole.fr/id/eprint/3274

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