Target Returns and Negative Interest Rates

D’Hondt, Catherine, Rudy De Winne and Aleksandar Todorovic
Additional contact information
D’Hondt, Catherine: Université catholique de Louvain, LIDAM/LFIN, Belgium

No 2021011, LIDAM Discussion Papers LFIN from Université catholique de Louvain, Louvain Finance (LFIN)

Abstract: In this paper, we question whether it is the zero interest rate level or the target return that most impacts the risk-taking behavior of individuals when making investment decisions. In our experiment, we assign either a low or a high target return to participants and ask them to make independent investment decisions as the risk-free rate fluctuates around their target return and, for some of them, becomes negative. We find that the prevailing reference point is the target return, regardless of the level of the risk-free rate. This result still holds even when the risk-free rate is negative, suggesting that the target return drives risk-taking more than does a zero interest rate.

Keywords: Negative interest rates; Risk-taking; Target return (search for similar items in EconPapers)
JEL-codes: G11 G21 G40 G41 G51 (search for similar items in EconPapers)
Pages: 29
Date: 2021-11-16
New Economics Papers: this item is included in nep-cba
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://dial.uclouvain.be/pr/boreal/en/object/bore ... tastream/PDF_01/view (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ajf:louvlf:2021011

Access Statistics for this paper

More papers in LIDAM Discussion Papers LFIN from Université catholique de Louvain, Louvain Finance (LFIN) Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Séverine De Visscher ().