Why Do Retail Investors Pick Green Investments? A Lab-in-the-Field Experiment With Crowdfunders, 2021

The files contain all raw data and Stata codes to reproduce the findings of the following published paper: Siemroth & Hornuf (2023): "Why Do Retail Investors Pick Green Investments? A Lab-in-the-Field Experiment with Crowdfunders", Journal of Economic Behavior & Organization, 209, 74-90. 399 investors participated in a decision experiment to choose between higher returns or more positive environmental impact (via a donation to carbon offsetting or to Greenpeace), or to choose between higher returns and more positive social impact (via a donation to the Red Cross). We link this experimental data to the investors field investments and explain whether their propensity to invest in green projects can be explained by (i) return expectations of green projects, (ii) how important positive environmental impact is to them, (iii) how important positive social impact is to them. The data also includes demographic data such as age and information on financial and economic background, as well as other survey answers.

Fintech (financial technology) describes a fairly recent phenomenon, where technological innovation is used to provide or improve financial services such as banking, retail investment, or borrowing. While Fintech can make the provision of financial services more efficient than before, it can also allow for new possibilities that were infeasible or too costly before. This project will focus on three forms of Fintech: crowdfunding, social trading, and robo-advising. Crowdfunding is the provision of funds by a large number of individuals to other individuals, groups, organisations or firms via the internet, typically by providing loans or selling shares of a business. For the past few years, the volume of crowdfunding grew by more than 100% annually (Massolution 2015). In the start-up sector, it is already seen by some as the most important external funding source. What is puzzling is that crowdfunding is a new investment opportunity, but arguably conventional investments are at least as good in terms of risk and return profile. For example, stocks tend to provide a higher expected return, government bonds can be cashed in more easily, and bank deposits are safer. Yet the crowdfunding growth rates indicate that it gives savers something that they do not get from conventional investments. Projects 1 and 2 will investigate the motivations of crowdfunders: Why do they invest in crowdfunding, and what in their view is the advantage over conventional investments? Project 2 investigates a specific motivation, whether having a positive social or environmental impact by crowdfunding projects plays a role, or whether only financial risk and return considerations play a role as suggested by conventional finance theory. Another focus of our research projects is to understand how decisions and outcomes differ because of these Fintech innovations; project 3 investigates whether investors suffer from a consumption-preference investment bias, where they invest in firms whose products they like but not necessarily those whose products are liked by the majority of consumers. If this is the case, then crowdfunding, where many investors decide independently which firms to fund, might provide a better capital allocation than e.g. venture capital financing, where only a few large investors decide. Hence, crowdfunding might democratise start-up funding decisions and improve welfare because investments go into the right firms, but there is no empirical evidence about this hypothesis yet. Projects 4 and 5 investigate copy trading, where some investors can copy the trades of other (historically successful) traders. Previous research has shown that copy trading leads to more risky investment choices, but it is not clear why people choose to copy others; project 4 addresses this question. Project 5 asks whether the knowledge of being copied, or the rewards given for it, changes the investment behaviour of those being copied, and why. If this is the case, then copy trading might reduce welfare among copy traders because they risk their savings to a greater degree than they otherwise would. Thus, our research has implications for regulators who want to protect consumers, and for trading platforms who might want to protect their customers in order to retain them. Finally, project 6 investigates robo-advising, which are algorithms that recommend investments and portfolios based on investor preferences. Historically, a similar purpose was served by wealth managers, who, however, would only offer their services to relatively wealthy clients, whereas robo-advisers can reduce costs and are therefore more easily accessible. The main questions are which characteristics of robo-advisers lead to them being accepted/adopted, and which kind of retail investors adopt them. A major welfare question is whether robo-advising leads to better investment decisions (e.g., more diversification, fewer investment biases).