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Negative Tail Events, Emotions & Risk Taking

Author

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  • Brice Corgnet

    (EM - EMLyon Business School, GATE - Groupe d'analyse et de théorie économique - UL2 - Université Lumière - Lyon 2 - ENS LSH - Ecole Normale Supérieure Lettres et Sciences Humaines - CNRS - Centre National de la Recherche Scientifique)

  • Camille Cornand
  • Nobuyuki Hanaki

Abstract

We design a novel experiment to assess investors' behavioural and physiological reactions to negative tail events. Investors who observed, without suffering from, tail events decreased their bids whereas investors suffering tail losses increased them. However, the increase in bids after tail losses was not observed for those who exhibited no emotional arousal. This suggests that emotions are key in explaining Prospect Theory prediction of risk seeking in the loss domain.

Suggested Citation

  • Brice Corgnet & Camille Cornand & Nobuyuki Hanaki, 2023. "Negative Tail Events, Emotions & Risk Taking," Post-Print hal-04228190, HAL.
    • Handle: RePEc:hal:journl:hal-04228190
    Note: View the original document on HAL open archive server: https://hal.science/hal-04228190
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    References listed on IDEAS

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    Keywords

    tail events; emotions; risk;
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