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Sense of Control Affects Investment Behavior

Author

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  • Li King King

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

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.

Suggested Citation

  • Li King King, 2010. "Sense of Control Affects Investment Behavior," Jena Economic Research Papers 2010-004, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2010-004
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    File URL: http://www.wiwi.uni-jena.de/Papers/jerp2010/wp_2010_004.pdf
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    Cited by:

    1. Curran, Louise & Lv, Ping & Spigarelli, Francesca, 2017. "Chinese investment in the EU renewable energy sector: Motives, synergies and policy implications," Energy Policy, Elsevier, vol. 101(C), pages 670-682.

    More about this item

    Keywords

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

    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

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