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Do sources of money matter in risk-taking behaviour?

Abstract :

If we were rational decision-makers, we would consider money fungible, meaning that one dollar, on one hand, has the same value as one dollar on the other hand regardless of the origin of the money. However, it is not the case. We tend to treat money differently, depending on the source of money and the purpose of using it. This is called mental accounting. If you receive a lump sum of inheritance money, would you treat it the same as if you receive the same amount but from a different source?

In this paper, we investigate if the source of money influences our risk decision when we want to make an investment decision with that money. We show that people with irregular income are more likely to take a higher risk than people with regular sources of income. Additionally, the source of money explains the risk-taking behavior of individuals. For example, people whose part of income includes dividend or interest income (e.g., stocks, bonds) and rental income are more likely to take higher risks.

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