Illusion of Control: Psychological Characteristics as Moderators in Financial Decision Making

Tobias Schütze, Ulrich Schmidt, Carsten Spitzer and Philipp C. Wichardt

Open Access Publications from Kiel Institute for the World Economy from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Financial decision making requires a sound handling of chance events. However, various studies have suggested that people are prone to illusion of control, i.e., the belief that prospects of a chancy event are better if they are involved in the randomisation process. This paper reports results from an experiment (N=420) suggesting that psychological characteristics moderate risk-taking behaviour under such circumstances. For example, we find that subjects high in sensation seeking buy more tickets of a risky lottery if they determine the winning numbers themselves and the random event lies in the future. The findings suggest that “illusion of control” effects are at least partly driven by underlying (idiosyncratic) emotions/preferences rather than an actual belief in control. Regarding applications, the results emphasise the importance of individual characteristics for the behaviour of decision makers in a financial context.

Keywords: illusion of control; financial decision making; investment decisions; risk (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-cbe and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/300919/1/Illusion-of-Control.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkie:300919

DOI: 10.3390/jrfm17020065

Access Statistics for this paper

More papers in Open Access Publications from Kiel Institute for the World Economy from Kiel Institute for the World Economy (IfW Kiel) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().