Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/207451 
Authors: 
Year of Publication: 
2019
Series/Report no.: 
IZA Discussion Papers No. 12626
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Attitudes toward risk underlie virtually every important economic decision an individual makes. In this experimental study, I examine how introducing a time delay into the execution of an investment plan influences individuals' risk preferences. The field experiment proceeded in three stages: a decision stage, an execution stage and a payout stage. At the outset, in the Decision Stage (Stage 1), each subject was asked to make an investment plan by splitting a monetary investment amount between a risky asset and a safe asset. Subjects were informed that the investment plans they made in the Decision Stage are binding and will be executed during the Execution Stage (Stage 2). The Payout Stage (Stage 3) was the payout date. The timing of the Decision Stage and Payout Stage was the same for each subject, but the timing of the Execution Stage varied experimentally. I find that individuals who were assigned to execute their investment plans later (i.e., for whom there was a greater delay prior to the Execution Stage) invested a greater amount in the risky asset during the Decision Stage.
Subjects: 
risk and time
risk preferences
reference-dependent utility preferences
temporal construal
time inconsistency
endowment effect
field experiment
JEL: 
D03
D81
D91
O10
O12
O16
Document Type: 
Working Paper

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