Negative Tail Events, Emotions and Risk Taking

Brice Corgnet (), Camille Cornand and Nobuyuki Hanaki ()
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Brice Corgnet: EM - EMLyon Business School, GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique
Nobuyuki Hanaki: Osaka University [Osaka]

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Abstract: We design a novel experiment to assess investors' behavioural and physiological reactions to negative tail events. Investors who observed, without suffering from, tail events decreased their bids whereas investors suffering tail losses increased them. However, the increase in bids after tail losses was not observed for those who exhibited no emotional arousal. This suggests that emotions are key in explaining Prospect Theory prediction of risk seeking in the loss domain.

Keywords: tail events; emotions; risk (search for similar items in EconPapers)
Date: 2024-02
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-rmg and nep-upt
Note: View the original document on HAL open archive server: https://hal.science/hal-04228190v1
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Published in The Economic Journal, 2024, 134 (658), pp.538-578. ⟨10.1093/ej/uead080⟩

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Journal Article: Negative Tail Events, Emotions and Risk Taking (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04228190

DOI: 10.1093/ej/uead080

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