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Article
Publication date: 17 April 2020

Tommy Gärling, Dawei Fang, Martin Holmen and Patrik Michaelsen

The purpose of this paper is to investigate how social comparison and motivation to compete account for elevated risk-taking in fund management corroborated by asset…

Abstract

Purpose

The purpose of this paper is to investigate how social comparison and motivation to compete account for elevated risk-taking in fund management corroborated by asset market experiments when performance depends on rank-based incentives.

Design/methodology/approach

In two laboratory experiments, university students (n1 = 240/n2 = 120) make choices between risky and certain outcomes of hypothetical sums of money. Both experiments investigate in which direction risky choices in an individual condition (individual risk preference) are shifted when participants compare their performance to another participant's performance (social comparison), being instructed or not to outperform the other (incentive to compete).

Findings

In the absence of incentives to compete, participants tend to minimize the differences between expected outcomes to themselves and to the other, but when provided with incentives to compete, they tend to maximize these differences. An independent additional increase in risk-taking is observed when participants are provided with incentives to compete.

Originality/value

Original findings include that social comparison does not evoke motivation to compete unless incentives are offered and that increases in risk-taking depend both on what the other chooses and the incentives.

Details

Review of Behavioral Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1940-5979

Keywords

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Article
Publication date: 10 July 2017

Tommy Gärling, Mary Blomman and Tim Alexander Carle

The purpose of this paper is to present an affect account that identifies emotions driving sell preferences in stock markets that result in the disposition effect (winning…

Abstract

Purpose

The purpose of this paper is to present an affect account that identifies emotions driving sell preferences in stock markets that result in the disposition effect (winning stocks hold too short and losing stocks too long) and to specify how stock prices are influenced.

Design/methodology/approach

The affect account is derived based on analyses of previous research showing the disposition effect, proposed explanations of the effect, and basic emotion research. An individual-level analysis is performed of the consequences for stock market prices.

Findings

The main proposal is that investors prefer to sell when price increases make the increasing balance of hope and fear equal to a faster increasingly balance of anticipated elation and disappointment, and when price decreases make the faster increasingly negative hope-fear balance equal to the increasing negative elation-disappointment balance. Steepness in slope of the negative hope-fear balance accounts for whether a loser is never sold (an extreme disposition effect), sold later than a winning stock (the usually observed disposition effect), or sold earlier than a winning stock (a reverse disposition effect). The individual-level analysis suggests that the affect-driven disposition effect would intensify or attenuate trends in stock prices depending on the demand-supply balance.

Originality/value

A conceptual contribution to research of emotion influences on stock trading and specifically to explanations of the disposition effect on sell decisions by less sophisticated and experienced investors.

Details

Review of Behavioral Finance, vol. 9 no. 2
Type: Research Article
ISSN: 1940-5979

Keywords

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Article
Publication date: 12 August 2019

Tommy Gärling, Dawei Fang and Martin Holmen

The purpose of this paper is to review behavioral explanations of the empirical observation that investment managers in mutual fund companies increase their risk taking…

Abstract

Purpose

The purpose of this paper is to review behavioral explanations of the empirical observation that investment managers in mutual fund companies increase their risk taking when offered incentives based on how their performance is ranked compared to peers.

Design/methodology/approach

A conceptual model is proposed of how research on social comparison, competition and financial risk taking may explain increased investor risk taking induced by rank-based incentives. Research findings in each of the strands of research are reviewed.

Findings

A proposed main explanation is that an above-average bias in comparing oneself with competitors results in overconfidence that increases risk taking. A complementary proposed explanation is that an anticipated loss when lagging behind increases risk taking, and another proposed complementary explanation the belief that risk taking is a winning strategy.

Originality/value

The results provide a broad framework for directions of research on social comparison processes in the mutual fund industry addressing the difficulties in implementing performance evaluations.

Details

Review of Behavioral Finance, vol. 12 no. 2
Type: Research Article
ISSN: 1940-5979

Keywords

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Abstract

Details

Threats from Car Traffic to the Quality of Urban Life
Type: Book
ISBN: 978-0-08-048144-9

Abstract

Details

Threats from Car Traffic to the Quality of Urban Life
Type: Book
ISBN: 978-0-08-048144-9

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Abstract

Details

Threats from Car Traffic to the Quality of Urban Life
Type: Book
ISBN: 978-0-08-048144-9

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Book part
Publication date: 12 April 2007

Linda Steg, and Tommy Gärling,

Abstract

Details

Threats from Car Traffic to the Quality of Urban Life
Type: Book
ISBN: 978-0-08-048144-9

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Abstract

Details

Handbook of Transport Geography and Spatial Systems
Type: Book
ISBN: 978-1-615-83253-8

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Book part
Publication date: 19 November 2003

Tommy Garling, Peter Loukopoulos and Martin Lee-Gosselin

Abstract

Details

Handbook of Transport and the Environment
Type: Book
ISBN: 978-0-080-44103-0

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Abstract

Details

Threats from Car Traffic to the Quality of Urban Life
Type: Book
ISBN: 978-0-08-048144-9

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