Financial professionals and climate experts have diverging perspectives on climate action

To address the climate crisis, it is necessary to transform the economy, with the finance industry taking a central role by implementing sustainable investment policies. This study aims to understand the motivations and preferences of its key players—financial professionals and climate experts. Here we use an incentivized experiment to measure the willingness to forgo payout to curb carbon emissions and a survey to elicit attitudes and beliefs toward the climate crisis. We provide suggestive evidence that financial professionals have a lower willingness to curb carbon emissions, are less concerned about climate change, and are less supportive of carbon taxes compared to climate experts. We report differences in motivations and priorities, with financial professionals emphasizing economic and reputational considerations and climate experts prioritizing ecological and social consequences of the crisis. Our findings highlight the importance of financial incentives and reputational concerns in motivating financial professionals to address the climate crisis

Social risk effects: the 'experience of social risk' factor

Anticipating "social risk", or risk caused by humans, affects decision-making differently from anticipating natural risk. Drawing upon a large sample of the US population (n=3,982), we show that the phenomenon generalizes to risk experience. Experiencing adverse outcomes caused by another human reduces future risk-taking, but experiencing the same outcome caused by nature does not. While puzzling from a consequentialist perspective, the Experience of Social Risk Factor that we identify deepens our understanding of decision-making in settings in which outcomes are co-determined by different sources of uncertainty. Our findings imply that a unifying theory of social risk effects requires new explanations

The Behavioral Economics of Extreme Event Attribution

Can Attribution Science, a method for quantifying – ex post – humanity’s contribution to adverse climatic events, induce pro-environmental behavioral change? We conduct a conceptual test of this question by studying, in an online experiment with 3,031 participants, whether backwards-looking attribution affects future decisions, even when seemingly uninformative to a consequentialist decision-maker. By design, adverse events can arise as a result of participants’ pursuit of higher payoffs (anthropogenic cause) or as a result of chance (natural cause). Treatments vary whether adverse events are causally attributable and whether attribution can be acquired at cost. We find that ex-post attributability is behaviorally relevant: Attribution to an anthropogenic cause reduces future anthropogenic stress and leads to fewer adverse events compared to no attributability and compared to attribution to a natural cause. Average willingness-to-pay for ex-post attribution is positive. The conjecture that Attribution Science can be behaviorally impactful and socially valuable has empirical merit

Essays in Behavioral Finance: Risk, Ambiguity, and Strategic Uncertainty

This thesis consists of six research articles. It covers determinants of financial advisors' investment decision for their clients (chapter 2); the evaluation of these decisions by clients (chapter 3); decision-making for others if uncertainty is modelled as ambiguity, rather than risk (chapter 4); the role of information disclosure about financial institutions in the absence and presence of economic linkages; a test of countercyclical risk aversion among students; and reports on new software for managing multiple installations of the experimental software oTree

Investment Preferences and Risk Perception: Financial Agents versus Clients

We study three fundamental components of financial agency settings: Perception and communication of investment profiles, the interaction of agents’ and clients’ preferences, and the role of (non-)monetary incentives. The perception of investment profile terminology is very heterogeneous, resulting in substantial miscommunication between clients and agents. Financial agents show a high willingness to implement their clients’ preferred investment profiles independent of monetary incentives. Agents’ investments for their clients are biased by their own investment preferences

Nobel and Novice: Author Prominence Affects Peer Review

Peer-review is a well-established cornerstone of the scientific process, yet it is not immune to status bias. Merton identified the problem as one in which prominent researchers get disproportionately great credit for their contribution while relatively unknown researchers get disproportionately little credit.1 We measure the extent of this effect in the peer-review process through a pre-registered field experiment. We invite more than 3,300 researchers to review a paper jointly written by a prominent author – a Nobel laureate – and by a relatively unknown author – an early-career research associate –, varying whether reviewers see the prominent author’s name, an anonymized version of the paper, or the less well-known author’s name. We find strong evidence for the status bias: while only 23 percent recommend “reject” when the prominent researcher is the only author shown, 48 percent do so when the paper is anonymized, and 65 percent do so when the little-known author is the only author shown. Our findings complement and extend earlier results on double-anonymized vs. singleanonymized review2,3,4,5,6,7 and strongly suggest that double-anonymization is a minimum requirement for an unbiased review process

Ambiguity attitudes in decisions for others

We probe the pattern of ambiguity aversion for moderate-likelihood gain prospects, and ambiguity seeking for low-likelihood gain prospects, if people make decisions not for themselves but as agents for others. We confirm the pattern both with and without accountability

Countercyclical Risk Aversion: Beyond Financial Professionals [Online Appendix and Replication Package]

We test if Cohn et al.’s (2015) experimental results on countercyclical risk aversion exhibited by financial professionals generalize to a standard student sample. In our sample, we do not find an effect of stock market bust or boom on subjects’ investments. We do not find a systematic emotional reaction, nor do we find an effect of variation in the emotional state (especially fear) on investment. Our results add to the literature documenting behavioral differences between financial professionals and non-professionals and, taking a policy perspective, underline the need for careful external validity checks of single sample experiments

Social Risk Effects: The 'Experience of Social Risk' Factor

Anticipating "social risk", or risk caused by humans, affects decision-making differently from anticipating natural risk. Drawing upon a large sample of the US population (n=3,982), we show that the phenomenon generalizes to risk experience. Experiencing adverse outcomes caused by another human reduces future risk-taking, but experiencing the same outcome caused by nature does not. While puzzling from a consequentialist perspective, the Experience of Social Risk Factor that we identify deepens our understanding of decision-making in settings in which outcomes are co-determined by different sources of uncertainty. Our findings imply that a unifying theory of social risk effects requires new explanations

A Test of (Weak) Certainty Independence

We provide a test of the axioms of certainty and weak certainty independence in models of decision-making under subjective uncertainty. We show that it is through these two weakenings of the classic independence axiom that prominent ambiguity models retain properties that stand in conflict with the ambiguity-sensitive behavior that is revealed in our experiment. Our findings suggest that this conflict may be of a more fundamental nature than what most of these models can accommodate. Our results call for the use of ambiguity models that can accommodate an ambiguity attitude which depends on the chances of winning.</p