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Volatility shocks and investment behavior

Author

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  • Huber, Christoph

    (Aalto University School of Business)

  • Huber, Juergen
  • Kirchler, Michael

Abstract

We investigate how volatility shocks affect investors’ risk-taking, risk perception and forecasts. We run artefactual field experiments with two participant pools (finance professionals and students), differing in (i) the direction of the shock (down, up, or a neutral case) and (ii) the presentation format of the time series (prices or returns). Professionals’ investments are negatively associated with the price change and performance of the stock and their perceived risk increases to a similar extent following shocks of all directions. Students’ risk perception, in contrast, is more closely related to the frequency of negative returns rather than an increase in volatility.

Suggested Citation

  • Huber, Christoph & Huber, Juergen & Kirchler, Michael, 2021. "Volatility shocks and investment behavior," OSF Preprints jr4eb_v1, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:jr4eb_v1
    DOI: 10.31219/osf.io/jr4eb_v1
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