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Market-Based Solutions to Vital Economic Issues


Kenan Institute 2023 Grand Challenge: Workforce Disrupted
Market-Based Solutions to Vital Economic Issues
May 21, 2020

The Asymmetry in Responsible Investing Preferences


We conduct an experiment designed to understand how social preferences affect investment decisions by observing subjects’ stock allocations and probability assessments. Key to the design is that subjects’ investment outcomes are treated by neutral, negative or positive payoff externalities on social causes. Our findings of asymmetric responses in probability perceptions and allocations suggest negative, but not positive, responsible investment (RI) externalities have significant effects. Thus, a taste for RI leads to significantly different investment choices, consistent with RI theory. Moreover, our results on probability perceptions and asymmetries between positive and negative treatments suggest important directions for accurately modeling RI tastes.

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