Rank Matters-The impact of social competition on portfolio choice

Oege Dijk, Martin Holmén, Michael Kirchler

Research output: Contribution to journalArticleScientificpeer-review

19 Citations (Scopus)

Abstract

Tournament incentives schemes have been criticized for inducing excessive risktaking among financial market participants. In this paper we investigate how relative performance-based incentive schemes and status concerns for higher rank influence portfolio choice in laboratory experiments. We find that both underperformers and over-performers adapt their portfolios to their current relative performance, preferring either positively or negatively skewed assets, respectively. Most importantly, these results hold both when relative performance is instrumental for higher payoffs in a tournament and when it is only intrinsically motivating and not payout-relevant. We find no effects when no relative performance information is given.
Original languageEnglish
Peer-reviewed scientific journalEuropean Economic Review
Volume66
Pages (from-to)97-110
ISSN0014-2921
DOIs
Publication statusPublished - 2014
MoE publication typeA1 Journal article - refereed

Keywords

  • 511 Economics
  • KOTA2013

Cite this