Social status and risk-taking in investment decisions

Arbeitspapier

A pervasive feature in the finance industry is relative performance, which can include extrinsic (money), intrinsic (self-image), and reputational (status) motives. In this paper, we model a portfolio decision with two assets and investigate how reputational motives (i.e., the public announcement of the winners or losers) influence risk-taking in investment decisions vis-a-vis intrinsic motives. We test our hypotheses experimentally with 864 students and 330 financial professionals. We find that reputational motives play a minor role among financial professionals, as the risk-taking of underperformers is already increased due to intrinsic motives. Student behavior, however, is mainly driven by reputational motives with risk-taking levels that come close to those of professionals when winners or losers are announced publicly. This indicates that professionals show higher levels of intrinsic (self-image) incentives to outperform others compared to non-professionals (students), but a similar behavior can be sparked among the latter by adding reputational incentives.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers in Economics and Statistics ; No. 2019-07

Classification and Topics

• Classification: Wirtschaft ; Portfolio Choice; Investment Decisions ; Field Experiments
• Subject: experimental finance ; behavioral economics ; investment game ; rank incentives ; social status ; reputational motives

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lindner, Florian ; Kirchler, Michael ; Rosenkranz, Stephanie ; Weitzel, Utz
• Event: Veröffentlichung
• (who): University of Innsbruck, Research Platform Empirical and Experimental Economics (eeecon)
• (where): Innsbruck
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/207073
• Last update: 10.03.2025, 11:43 AM CET