Please use this identifier to cite or link to this item:

Low risk and high return - how emotions shape expectations on the stock market

Kempf, Alexander
Niessen-Ruenzi, Alexandra
Merkle, Christoph
Year of Publication: 
Series/Report no.: 
CFR working paper 09-10
This experimental paper investigates the impact of emotions on risk and return estimates of stocks. Participants rate well-known blue-chip firms on an emotional scale and forecast risk and return of the firms' stock. We find that positive emotions lead to a prediction of high return and low risk, while negative emotions lead to a prediction of low return and high risk. This bias increases with participants' confidence in their ratings and decreases with financial literacy. We conclude that firms with a positive emotional appeal attract less financially literate and more emotional investors. In line with this conjecture, we find that firms that are rated very positively are held by a larger fraction of retail investors.
Risk and Return Estimation
Behavioral Finance
Affect Heuristic
Is replaced by the following version: 
Document Type: 
Working Paper

Files in This Item:
There are no files associated with this item.
The document was removed on behalf of the author(s)/ the editor(s) on: February 13, 2013

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.