Risk-Taking with Multiplicative Background Risk: Experimental Evidence

Last registered on July 13, 2021

Pre-Trial

Trial Information

General Information

Title
Risk-Taking with Multiplicative Background Risk: Experimental Evidence
RCT ID
AEARCTR-0007953
Initial registration date
July 13, 2021
Last updated
July 13, 2021, 9:39 AM EDT

Locations

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Primary Investigator

Affiliation
Universit├Ąt Hamburg

Other Primary Investigator(s)

PI Affiliation
Universit├Ąt Hamburg
PI Affiliation
Tippie College of Business

Additional Trial Information

Status
In development
Start date
2021-08-09
End date
2021-09-30
Secondary IDs
Abstract
Multiplicative risk vulnerability determines whether an individual behaves in a more risk averse way in the presence of a multiplicative background risk. We add a multiplicative background risk to a standard portfolio problem and check whether individuals behave in accordance with multiplicative risk vulnerability. We vary the skewness of the background risk in order to study whether individuals behave differently in the presence of a skewed background risk compared to a symmetric one.
External Link(s)

Registration Citation

Citation
Hinck, Sebastian, Richard Peter and Petra Steinorth. 2021. "Risk-Taking with Multiplicative Background Risk: Experimental Evidence." AEA RCT Registry. July 13. https://doi.org/10.1257/rct.7953-1.0
Experimental Details

Interventions

Intervention(s)
Individuals make two risky choices: one without background risk (control treatment) and one with a multiplicative background risk (treatment).
Intervention Start Date
2021-08-09
Intervention End Date
2021-08-22

Primary Outcomes

Primary Outcomes (end points)
Investment amounts without and with background risk (within subjects)
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Investment amounts with symmetric and skewed background risk (between subjects)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
Individuals make two investment choices: one in the presence of a multiplicative background risk (either symmetric or skewed, allocated randomly) and one without a background risk. We compare investment amounts in order to elicit differences in risk taking solely driven by the presence of the multiplicative background risk. In addition, we also compare investment amounts across symmetric and skewed background risks.
Experimental Design Details
Not available
Randomization Method
Individuals are sampled via hroot. Allocation to treatments (symmetric or skewed background risk) and order of investment tasks (control and background risk) is random at the individual level and implemented in oTree.
Randomization Unit
Individuals
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
No clusters, we aim to run six experimental sessions (depending on participation)
Sample size: planned number of observations
324 individuals (based on power analysis using expected investment amounts and variances)
Sample size (or number of clusters) by treatment arms
162 individuals for each treatment (symmetric or skewed background risk)
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number