Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103757
Authors: 
Bosman, Ronald
Kräussl, Roman
van Galen, Thomas
Year of Publication: 
2014
Series/Report no.: 
CFS Working Paper Series 495
Abstract: 
This paper experimentally investigates how emotions are associated with option prices and risk perception. Using a binary lottery, we find evidence that the emotion 'surprise' plays a significant role in the negative correlation between lottery returns and estimates of the price of a put option. Our findings shed new light on various existing theories on emotions and affect. We find gratitude, admiration, and joy to be positively associated with risk perception, although the affect heuristic predicts a negative association. In contrast with the predictions of the appraisal tendency framework (ATF), we document a negative correlation between option price and surprise for lottery winners. Finally, the results show that the option price is not associated with risk perception as commonly used in psychology.
Subjects: 
risk perception
emotions
affect heuristic
option prices
experiment
JEL: 
D81
D03
G17
Document Type: 
Working Paper

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