Motivated beliefs, social preferences, and limited liability in financial decision-Making

Experiments in finance

“…In their pre-registered study they find, contrary to expectations, that neither the portfolio valuation nor trading decisions are affected by the fact that portfolios are self-built (vis-á-vis not self-built). The latter two studies, Ahrens and Bosch-Rosa (2023) and Brunner et al (2023), show that psychological concepts that have been shown in other contexts cannot be automatically transferred to financial decision-making or to significantly different settings in financial decision-making. Both studies also show that pre-registration is essential for the reliability of their important (Null) results.…”

“…In their re-registered study, they replicate most of the main effects of the original studies, and corroborate their validity in adjusted settings. Ahrens and Bosch-Rosa (2023) analyze the role of motivated beliefs and social preferences in an investor-client setup. Against expectations, they do not detect the formation of motivated beliefs in their pre-registered analysis, partly because of a relatively large portion of selfish subjects, who do not need to form motivated beliefs.…”

“…Interestingly, in this experimental setting, different monetary incentive schemes hardly affected behavior. As explained earlier, the study of Ahrens and Bosch-Rosa (2023) uses a similar investor-client setting to analyze motivated belief formation and highlights the importance of investors' social preferences when taking financial decisions for others. The authors also look at channels through which limited liability might increase risk-taking for others.…”