How negative interest rates affect the risk-taking of individual investors: Experimental evidence

Maren Baars, Henning Cordes and Hannes Mohrschladt

Finance Research Letters, 2020, vol. 32, issue C

Abstract: Since the financial crisis of 2008, risk-free interest rates are at historical lows and even turned negative in some developed countries. We study experimentally how such changes in the interest rate regime affect the risk-taking of individual investors. Keeping the risk premium constant, we find that a reduction in the interest rate does not affect risk-taking in general. Risk-taking only increases significantly if the interest rate falls below zero. These findings are in line with value functions that are highly return sensitive around zero.

Keywords: Negative interest rates; Loss aversion; Portfolio theory; Financial decision making (search for similar items in EconPapers)
JEL-codes: D81 E43 G11 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:32:y:2020:i:c:s1544612318303921

DOI: 10.1016/j.frl.2019.04.035

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