Dr. David Disatnik
“Not That Safe, Yet Held”: The Joint Effect of Need for Closure and Risk Aversion on Investment Decisions
Investment decisions play a crucial role in the way consumers manage their wealth. Therefore, it is important to understand how they make these decisions. The present research contributes to this attempt by uncovering the moderating impact of need for closure on risk aversion within the context of investment decisions. Using unique data on actual financial holdings of individuals, we first show that among individuals high in need for closure, those who are also highly risk-averse may hold financial assets that are not safer compared to the assets held by those with a lower level of risk aversion. Then, we turn to the lab and conduct five experiments that explore this not-that-safe-yet-held effect by either measuring or inducing need for closure, investigate the underlying mechanism of the effect, demonstrate possible boundary conditions, and present a practical way to overcome it.