Investment, Resolution of Risk, and the Role of Affect

Frans van Winden (), Michal Krawczyk and Astrid Hopfensitz

No 2975, CESifo Working Paper Series from CESifo

Abstract: This experimental study is concerned with the impact of the timing of the resolution of risk on people’s willingness to take risks, with a special focus on the role of affect. While the importance of anticipatory emotions has so far been only inferred from decisions regarding hypothetical choice problems, we had participants put their own money at risk in a real investment task. Moreover, emotions were explicitly measured, including anticipatory emotions experienced during the waiting period under delayed resolution (which involved two days). Affective traits and risk attitudes were measured through a web-based questionnaire before the experiment and participants’ preferences for resolution timing, risk, and time were incentive compatibly measured during the experiment. Main findings are that delayed resolution can affect investment, that the effect depends on the risk involved, and that (among all the measures considered) only emotions can explain our results, albeit in ways that are not captured by existing models.

Keywords: investment decision; delayed resolution of risk; emotions; experiment (search for similar items in EconPapers)
JEL-codes: C91 D81 G11 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Investment, resolution of risk, and the role of affect (2011)
Working Paper: Investment, Resolution of Risk, and the Role of Affect (2009)
Working Paper: Investment, Resolution of Risk, and the Role of Affect (2008)
Working Paper: Investment, Resolution of Risk, and the Role of Affect (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2975

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