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Sense of Control Affects Investment Behavior

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  • Li King King

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    (Strategic Interaction Group, Max Planck Institute of Economics, Jena)

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    Abstract

    Preference 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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    File URL: http://www.wiwi.uni-jena.de/Papers/jerp2010/wp_2010_004.pdf
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    Bibliographic Info

    Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2010-004.

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    Date of creation: 20 Jan 2010
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    Handle: RePEc:jrp:jrpwrp:2010-004

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    Related research

    Keywords: Preference for control; sense of control; risk attitudes; illusion of control; source preference; portfolio choice; behavioral finance; comparative mindset; non-comparative mindset;

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