Fast and Slow Investments in Asset Markets: Influences on Risk Taking

• In an experiment business school students (n=123) role play being investment managers in a fund company incentivized by rank-based performance compensations. Investments are made at self-paced rates in stocks with normal return distributions varying in expected value and variance. Results show that investments increase above but decrease and are relatively more risky below a relative comparison standard. Above the comparison standard, hypothetical monetary bonuses do not increase risk taking more than non-monetary bonuses, while below the comparison standard hypothetical monetary penalties suppress risk taking more than non-monetary penalties do. Compared to a control condition with no relative comparison standard and hypothetical incentives, risk taking is lower below but not different above the comparison standard. The difference in results suggest that time pressure and complexity of strategic optimization are determinants of elevated risk taking in asset market experiments investigating effects of rank-based performance compensations.

Ämnesord

SAMHÄLLSVETENSKAP  -- Psykologi (hsv//swe)

SOCIAL SCIENCES  -- Psychology (hsv//eng)

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

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