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Volatility Shocks and Investment Behavior

Christoph Huber (), Jürgen Huber () and Michael Kirchler ()

Working Papers from Faculty of Economics and Statistics, University of Innsbruck

Abstract: In this paper we investigate how volatility shocks influence investors' perceptions about a stock's risk, its future development, and investors' investment propensity. We ran artefactual field experiments with two participant pools (finance professionals and students) that had to take investment decisions, differing in (i) the direction of the shock (down, up, straight) and (ii) the presentation format of the time series (prices or returns). We find that finance professionals perceive all shocks to increase risk similarly, while students do not perceive upwardlytrending shocks to increase the riskiness of the stock. Furthermore, we show that investment propensity is negatively associated with the direction of the shock and professionals do not show differences in price forecasts between presentation formats, but students do.

Keywords: Risk perception; experimental finance; finance professionals; volatility shocks (search for similar items in EconPapers)
JEL-codes: C91 G11 G41 (search for similar items in EconPapers)
Pages: 65
Date: 2021-06
New Economics Papers: this item is included in nep-cwa, nep-exp and nep-rmg
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