Sadder but wiser? Mood, overconfidence and uncertainty preferences

• Applicant: Professor Dr. Arnold Picot (†)
• Subject Area: Accounting and Finance
• Term: from 2011 to 2015
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 190712369

This project contributes to the field of behavioural economics by investigating the influence of moods on overconfidence (an important cognitive bias) and on preferences for risk and ambiguity. Our incentive-compatible economic experiments will investigate how moods influence people’s willingness to make risky and ambiguous investment decisions and their tendency to deviate from rational decision-making. We plan to conduct experiments with naïve and experienced subjects (students and entrepreneurs) as well as with financially low and high stakes to test important aspects of external validity. This project will contribute to our understanding of why individuals make sub-optimal decisions and the emotional circumstances under which they are likely to do so. These insights will help us better understand the behavioural origins of financial crises, the start-up of new companies, investments in innovation and other situations that involve decision-making under risky and ambiguous circumstances. Our results may be used to improve decision-making behaviour through education, which could have significant benefits at the individual and societal levels.

• DFG Programme: Research Grants
• International Connection: Netherlands
• Participating Person: Professor Dr. Philipp Koellinger