Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2008-05-15 Number: 08-047/1 Author-Name: Frans van Winden Author-Email: email@example.com Author-Workplace-Name: University of Amsterdam Author-Name: Michal Krawczyk Author-Email: firstname.lastname@example.org Author-Workplace-Name: University of Amsterdam Author-Name: Astrid Hopfensitz Author-Workplace-Name: University of Toulouse Title: Investment, Resolution of Risk, and the Role of Affect Abstract: This discussion paper has resulted in a publication in the 'Journal of Economic Psychology' 32(6) 918-39.
This experimental study is concerned with the impact of the timing of the resolution of risk onpeople's willingness to take risks, with a special focus on the role of affect. While the importanceof anticipatory emotions has so far been only inferred from decisions regarding hypothetical choiceproblems, we had participants put their own money at risk in a real investment task. Moreover,emotions were explicitly measured, including anticipatory emotions experienced during the waitingperiod under delayed resolution (which involved two days). Affective traits and risk attitudes weremeasured through a web-based questionnaire before the experiment and participants' preferencesfor resolution timing, risk, and time were incentive compatibly measured during the experiment.Main findings are that delayed resolution can affect investment, that the effect depends on the riskinvolved, and that (among all the measures considered) only emotions can explain our results,albeit in ways that are not captured by existing models. Classification-JEL: C91; D81; G11 Keywords: Investment decision; delayed resolution of risk; emotions; experiment File-Url: http://papers.tinbergen.nl/08047.pdf File-Format: application/pdf File-Size: 478510 bytes Handle: RePEc:tin:wpaper:20080047