AEA RCT Registry

Trial Information

General Information

Title

Is Risk Tolerance Time Inconsistent?

RCT ID

AEARCTR-0004453

Initial registration date

July 15, 2019

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

July 16, 2019, 9:22 AM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country

Tanzania, United Republic of

Region

Morogoro

Primary Investigator

Name

Plamen Nikolov

Affiliation

State University of New York (Binghamton) & Harvard University

Contact Primary Investigator

Other Primary Investigator(s)

Additional Trial Information

Status

Completed

Start date

2015-06-01

End date

2016-06-01

Keywords

Finance & Microfinance, Other

Additional Keywords

risk and time, risk preferences, reference-point models, field experiment

JEL code(s)

D03, D81, D91, OI10, O12, O16

Secondary IDs

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 proceeds in three stages: a decision stage, an execution stage and a payout stage. At the outset, in the Decision Stage (Stage 1), each subject is asked to make an investment plan by splitting a monetary investment amount between a risky asset and a safe asset. Subjects are informed that the investment plans they make in the Decision Stage are binding and that they will be executed during the Execution Stage (Stage 2). The Payout Stage (Stage 3) is the payout date. The timing of the Decision Stage and Payout Stage is the same for each subject, but the timing of the Execution Stage varies experimentally.

External Link(s)

Registration Citation

Citation

Nikolov, Plamen. 2019. "Is Risk Tolerance Time Inconsistent?." AEA RCT Registry. July 16. https://doi.org/10.1257/rct.4453-1.0

Former Citation

Nikolov, Plamen. 2019. "Is Risk Tolerance Time Inconsistent?." AEA RCT Registry. July 16. https://www.socialscienceregistry.org/trials/4453/history/50123

Sponsors & Partners

Experimental Details

Interventions

Intervention(s)

We recruit 350 subjects, all of whom are over 18 years of age, from catchment areas with the help of village and district leaders in Morogoro, Tanzania. We directly invite all individuals to participate in our study over a period of four weeks.

Each individual in our three-stage study faces two investment choices: one is a risky asset (A), offering a high mean and variance, while the other is a safe asset (B). A had a 50 percent chance of returning five times the amount invested (R) and a 50 percent chance of returning nothing. B pays out the amount invested in it (i.e., the difference between the original money endowment (I) and R, or I-R). There are five groups of investors, and each group is assigned a different time for the execution of their investment plans.

• The Decision Stage (t0): During this stage, each subject makes a plan regarding the investment of 2,000 Tanzanian shillings (TZS) (approximately 1.3 USD). The investment is to be spread between A and B. The subjects knows how long they would have to wait until execution (i.e., they are advised when the execution will occur) when they make their investment plans.
• The Execution Stage (t1): During this stage, individuals are given the cash that is promised in the Decision Stage (I) and told to invest it in accordance with the investment plan made in the Decision Stage.
• The Payout Stage (t2): During this stage, the outcomes of lotteries chosen at t0 is revealed (based on a flip of a coin, the risky asset is deemed either successful or otherwise), and each individual receives his or her payout.

Intervention Start Date

2015-06-01

Intervention End Date

2016-06-01

Primary Outcomes

Primary Outcomes (end points)

Amount invested in risky and safe assets
Does the timing of the experimentally assigned second stage (t1) influence the amount invested in risky asset.

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Secondary Outcomes (explanation)

Experimental Design

We recruit 350 subjects, all of whom are over 18 years of age, from catchment areas with the help of village and district leaders in Morogoro, Tanzania. We directly invite all individuals to participate in our study over a period of four weeks.

Each individual in our three-stage study faces two investment choices: one is a risky asset (A), offering a high mean and variance, while the other is a safe asset (B). A had a 50 percent chance of returning five times the amount invested (R) and a 50 percent chance of returning nothing. B pays out the amount invested in it (i.e., the difference between the original money endowment (I) and R, or I-R). There are five groups of investors, and each group is assigned a different time for the execution of their investment plans.

• The Decision Stage (t0): During this stage, each subject makes a plan regarding the investment of 2,000 Tanzanian shillings (TZS) (approximately 1.3 USD). The investment is to be spread between A and B. The subjects knows how long they would have to wait until execution (i.e., they are advised when the execution will occur) when they make their investment plans.
• The Execution Stage (t1): During this stage, individuals are given the cash that is promised in the Decision Stage (I) and told to invest it in accordance with the investment plan made in the Decision Stage.
• The Payout Stage (t2): During this stage, the outcomes of lotteries chosen at t0 is revealed (based on a flip of a coin, the risky asset is deemed either successful or otherwise), and each individual receives his or her payout.

Experimental Design Details

Randomization Method

Computer program in Stata

Randomization Unit

Individuals

Was the treatment clustered?

No

Experiment Characteristics

Sample size: planned number of clusters

350 individuals

Sample size: planned number of observations

350

Sample size (or number of clusters) by treatment arms

350 units even randomized into one of five treatment arms

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

Supporting Documents and Materials

IRB

Institutional Review Boards (IRBs)

IRB Name

Study has received IRB approval. Details not available.

IRB Approval Date

Details not available

IRB Approval Number

Details not available

Analysis Plan

Is Risk Tolerance Time Inconsistent?

Pre-Trial

General Information

Locations

Primary Investigator

Other Primary Investigator(s)

Additional Trial Information

Registration Citation

Interventions

Primary Outcomes

Secondary Outcomes

Experimental Design

Experiment Characteristics

Institutional Review Boards (IRBs)

Post-Trial

Study Withdrawal

Intervention

Data Publication

Program Files

Relevant Paper(s)

Reports & Other Materials