Do markets encourage risk-seeking behaviour?
(2022) In European Journal of Finance 28(13-15). p.1474-1480- Abstract
Excessive risk-taking in markets can have devastating consequences as the latest financial crises have highlighted. In this paper, we ask whether markets as an institution encourages such excessive risk-taking. To establish causality, we isolate the effects of market interaction in a laboratory experiment keeping other possibly confounding factors constant. We find that the opposite is true. Markets decrease participants' willingness to take risks. This finding can be explained by social comparison utility in the presence of negatively correlated risks.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/360b5003-c44e-4b24-9eac-70d9ac5f74bc
- author
- Mengel, Friederike LU and Peeters, Ronald
- organization
- publishing date
- 2022
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Experiment, Markets, Risk-taking, Social comparison
- in
- European Journal of Finance
- volume
- 28
- issue
- 13-15
- pages
- 1474 - 1480
- publisher
- Taylor & Francis
- external identifiers
-
- scopus:85092074838
- ISSN
- 1351-847X
- DOI
- 10.1080/1351847X.2020.1828963
- language
- English
- LU publication?
- yes
- id
- 360b5003-c44e-4b24-9eac-70d9ac5f74bc
- date added to LUP
- 2020-11-03 11:58:43
- date last changed
- 2023-01-16 10:14:57
@article{360b5003-c44e-4b24-9eac-70d9ac5f74bc, abstract = {{<p>Excessive risk-taking in markets can have devastating consequences as the latest financial crises have highlighted. In this paper, we ask whether markets as an institution encourages such excessive risk-taking. To establish causality, we isolate the effects of market interaction in a laboratory experiment keeping other possibly confounding factors constant. We find that the opposite is true. Markets decrease participants' willingness to take risks. This finding can be explained by social comparison utility in the presence of negatively correlated risks.</p>}}, author = {{Mengel, Friederike and Peeters, Ronald}}, issn = {{1351-847X}}, keywords = {{Experiment; Markets; Risk-taking; Social comparison}}, language = {{eng}}, number = {{13-15}}, pages = {{1474--1480}}, publisher = {{Taylor & Francis}}, series = {{European Journal of Finance}}, title = {{Do markets encourage risk-seeking behaviour?}}, url = {{http://dx.doi.org/10.1080/1351847X.2020.1828963}}, doi = {{10.1080/1351847X.2020.1828963}}, volume = {{28}}, year = {{2022}}, }