Investing with Brain or Heart? A Field Experiment on Responsible Investment

Abstract:     
Socially responsible investment (SRI) has emerged as a prominent trend in financial markets and is characterized by the integration of financial and non-financial objectives. The purpose of this paper is to investigate the relative strength of wealth concerns and moral concerns in individual investors’ decision to invest responsibly. We investigate this in a unique field experiment of investors in an online banking context, wherein we frame responsible investment either financially or morally in order to study investors’ subsequent behavior. We find that wealth concerns have higher weight than moral concerns for two stages in the decision making process: information search and investment behavior. In addition, we find that the effectiveness of financial framing increases with the financial sophistication of the investor. Our study contributes to the literature by providing real-life insight into prosocial decision making in financial markets.

Number of Pages in PDF File: 28

Keywords: Behavioral economics, field experiment, household finance, investor behavior, socially responsible investment

JEL Classification: C93, G11, G20

working papers series