Fast and Slow Investments in Asset Markets: Influences on Risk Taking

Tommy Gärling, Dawei Fang, Martin Holmen and Patrik Michaelsen

Journal of Behavioral Finance, 2021, vol. 22, issue 1, 84-96

Abstract: The aim is to investigate whether elevated risk taking in asset market experiments driven by rank-based performance incentives decrease if removing a time limit on choices and minimizing complexity of strategic optimization. In a scenario experiment, business school students (n = 123) acting as investment managers in a fund company make investments at self-paced rates. The results show that investments are influenced by rank-based compensations implemented as a relative comparison standard but not that risk taking is elevated. The motive to minimize losses relative to others appear to counteract risk taking, particularly if poor performance is penalized by reducing the fixed income.

Date: 2021
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DOI: 10.1080/15427560.2020.1747071

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