Abstract
The number of individual investors who trade stocks online has significantly increased in recent years. Surprisingly, consumer researchers have paid little attention to how emotions influence individual investors’ stock-trading decisions. In a series of three experiments, the authors investigate the impact of incidental fear on the decision to sell in a stock market simulation. The results show that fearful (vs. control) participants sell their stock earlier (Experiments 1–3). This effect, however, is contingent on particular features of the market. Fear leads to early sell-off when parti-pant believe the value of the stock is peer generated but not when they believe the value of the stock is computer generated (Experiment 2). Early sell-off as a result of incidental fear also occurs when participants believe their risk attitude is common in the market but not when they believe their risk attitude is unique (Experiment 3). Social projection—that is, people's tendency to rely on their current state of mind to estimate other people's actions—explains the phenomenon.
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