Experimental evidence on socially responsible investments – The role of preferences and information

We implement an incentivized online stock market game and study individual investment decisions in different treatments. After collecting baseline demand for sustainable investments, we exogenously vary information on the performance of firms with a low ESG risk profile between different groups and observe subjects reaction to that new information in our incentivized stock market game. Furthermore, we vary incentives to invest in low ESG risk stocks and observe participants selective information acquisition and their subsequent investment behavior.

2021-09-05

2021-10-31

Investments in sustainable stocks;
Wtp for ESG risk scores;
Choice of ESG information;
Share of investments in portfolio 1 (low ESG risk score);
Change of the share of investments in portfolio 1 (low ESG risk score);

We implement an online experiment where individuals participate in an online stock market game. We first collect baseline information about the demand for ESG in the stock market game. In the next step, our intervention randomly assigns information about the performance of stocks with a low ESG risk score to the participants. 50% of the sample receives information of real studies which tell them that low ESG risk stocks outperform, while the remaining 50% receive information of real studies which tell that low ESG risk stocks underperform. We observe individuals reaction in the stock market game. In a later stage of the experiment, we randomly assign different incentives to invest in a portfolio with a low ESG risk to the participants. Part of the participants can endogenously acquire information about ESG and moral behavior while others cannot. We again observe participants behavior in the stock market game.

Computer-based randomization by otree

Individual

No

600 students + 60 students buffer (660 in total)

600 students + 60 students buffer (660 in total)

information treatment:
300 sustainable stocks outperform conventional stocks treatment;
300 sustainable stocks outperform conventional stocks treatment;

combined information and incentive treatment (same individuals as before):
300 (150 high incentive and 150 low incentive) control group (no study);
300 (150 high incentive and 150 low incentive) study treatment (ESG and moral
behaviour);

For hypothesis 4 and 5, we only use half of the sample (n=300). Our sample size gives us 80% power of finding an effect size of 16% (Cohens´h 0.32) at an alpha of 5%. For the rest of the hypotheses, our sample size of 600 in total gives us 80% power of finding an effect size of 11% (Cohen´s h = 0.23) at an alpha of 5%.