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Volatility shocks and investment behavior

Author

Listed:
  • Huber, Christoph

    (University of Innsbruck)

  • Huber, Juergen
  • Kirchler, Michael
Abstract
In this paper we investigate how volatility shocks influence investors’ perceptions about a stock's risk, its future development, and investors' investment propensity. We ran artefactual field experiments with two participant pools (finance professionals and students) that had to take investment decisions, differing in (i) the direction of the shock (down, up, straight) and (ii) the presentation format of the time series (prices or returns). We find that finance professionals perceive all shocks to increase risk similarly, while students do not perceive upwardly-trending shocks to increase the riskiness of the stock. Furthermore, we show that investment propensity is negatively associated with the direction of the shock and professionals do not show differences in price forecasts between presentation formats, but students do.

Suggested Citation

  • Huber, Christoph & Huber, Juergen & Kirchler, Michael, 2021. "Volatility shocks and investment behavior," OSF Preprints jr4eb, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:jr4eb
    DOI: 10.31219/osf.io/jr4eb
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    6. Lukas Menkhoff & Carsten Schröder, 2022. "Risky Asset Holdings During Covid‐19 and their Distributional Impact: Evidence from Germany," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(2), pages 497-517, June.

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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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