Experimental Economics Seminar for April 10

Events, Seminars | April 6, 2015

Join us for the next ICES Experimental Economics Seminar of the semester, featuring Steffen Andersen.

Prof. Andersen, of Copenhagen Business School, will discuss his paper (co-authored with Tobin Hanspal and Kasper Meisner Nielsen), Once Bitten, Twice Shy: Do Personal Experiences or Wealth Changes Affect Risk Taking? (abstract). The talk will take place on Friday, April 10, from 4:00 to 5:00pm, in room 5183 of the Metropolitan Building, Arlington campus.

Visit the Seminar schedule to access the paper and to learn more about upcoming speakers.

Abstract

We study how personal experiences affect individual risk taking. To separate the intertwining
effects of personal experiences and wealth changes, our identification strategy relies on the
decision to keep unexpected inheritances of risky assets. Experience derives from investments in
banks that defaulted in the aftermath of the financial crisis. To differentiate the effect of personal
experiences, we classify the degrees of experiences into first-hand experiences from personal
losses, second-hand experiences from the losses of close family members, and third-hand
experiences from living in municipalities where banks defaulted. We find that third-hand
experiences result in marginally lower risk taking. Second-hand experiences have a relatively
stronger negative effect, whereas the effect of first-hand experiences on risk taking is strongly
negative. Overall, our results demonstrate that personal experiences aside from changes in wealth
explain substantial heterogeneity in individuals’ risk taking.

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