Working Paper: NBER ID: w29288
Authors: Jacquelyn Humphrey; Shimon Kogan; Jacob Sagi; Laura Starks
Abstract: We design an experiment to understand how social preferences affect investment decisions through stock allocations and probability assessments. The major preference channel is asymmetric in social outcomes – although negative and positive responsible investment (RI) externalities have the same magnitudes, negative externalities have greater impact on investment choices. The effect is persistent, but heterogenous. We also find asymmetries in belief formation and learning constitute a secondary channel. Overall, our results are consistent with important stylized empirical facts and the predictions of recent RI theories that social preferences lead to different investment choices, but our analyses also suggest important future modeling directions.
Keywords: No keywords provided
JEL Codes: C91; G11; G41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Negative responsible investment (RI) externalities (D62) | reduced risk attitudes (D81) |
| Negative responsible investment (RI) externalities (D62) | allocation to risky assets (G11) |
| Negative responsible investment (RI) externalities (D62) | distorted subjective beliefs (D91) |
| distorted subjective beliefs (D91) | biased risk assessments (D91) |
| Negative responsible investment (RI) externalities (D62) | investment decisions (G11) |
| asymmetries in belief formation and learning (D83) | investment decisions (G11) |
| Negative responsible investment (RI) externalities (D62) | allocation response functions to subjective probabilities (C11) |
| allocation response functions to subjective probabilities (C11) | sensitivity to negative externalities (D62) |