Sense of Control Affects Investment Behavior
AbstractPreference for control affects investment behavior. Participants of laboratory experiments invest different amount of money in a risky asset when face with two different methods of control which have identical payoff structure and probability distribution, but provide different sense of control. Preference for controlling and not controlling are both observed. Participants increase their investment when their preferred method of control is used. Participants who prefer to control more reduce their investment more strongly when face with less control. Preference for control has larger effect on investment behavior when participants are induced to have a comparative mindset rather than non-comparative mindset.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2010-004.
Date of creation: 20 Jan 2010
Date of revision:
Preference for control; sense of control; risk attitudes; illusion of control; source preference; portfolio choice; behavioral finance; comparative mindset; non-comparative mindset;
Find related papers by JEL classification:
- B49 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Other
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G19 - Financial Economics - - General Financial Markets - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-02-05 (All new papers)
- NEP-CBE-2010-02-05 (Cognitive & Behavioural Economics)
- NEP-EXP-2010-02-05 (Experimental Economics)
- NEP-UPT-2010-02-05 (Utility Models & Prospect Theory)
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