Stakes and Mistakes

Steffen Andersen, Abhiroop Mukherjee, Kasper Meisner Nielsen*

*Corresponding author for this work

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

We provide causal evidence on one of the most prominent critiques of behavioral finance – that most of the evidence in psychology, which underpins the field, comes from experiments with little at stake for participants. How far do behavioral biases – leading to investment mistakes – get attenuated when stakes are raised? We study this issue by exploiting exogenous variation in stakes resulting from unexpected inheritances due to sudden parental death. We find that increasing stakes reduces investment mistakes, but this effect is economically small. Mistakes do not disappear when stakes are raised, even when this increase is substantial.
Original languageEnglish
Publication date2021
Number of pages38
Publication statusPublished - 2021
EventThe Eighth Annual Asian Bureau of Finance and Economic Research. ABFER 2021 - Virtual, Singapore
Duration: 24 May 20212 Jun 2021
Conference number: 8
https://abfer.org/events/abfer-events/annual-conference/235:immb2021

Conference

ConferenceThe Eighth Annual Asian Bureau of Finance and Economic Research. ABFER 2021
Number8
LocationVirtual
CountrySingapore
Period24/05/202102/06/2021
Internet address

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