Tear Down this Wall Street: Anti-finance Rhetoric, Subjective Beliefs, and Investment

Abstract

Anti-finance rhetoric pre-dates modern capitalism, is diffused in capitalistic economies, and peaks during economic crises. Is anti-finance rhetoric an inert cultural byproduct of crises, or does it in turn affect economic decision-making? If it does, through which channels? To avoid the confounding shocks that accompany economic crises, I manipulate exposure to anti-finance rhetoric in an artefactual field experiment. Subjects exposed to anti-finance rhetoric invest less often and less money in risky opportunities framed as stock investments relative to controls. Risk aversion does not change with exposure, whereas exposed subjects distrust the financial sector more than others. Consistent with ideologically-motivated cognition, educated, experienced, and female subjects react more than others. Treated subjects react to positive news but not to negative news about investment outcomes---anti-finance rhetoric might make them expect bad investment outcomes despite knowing the objective probabilities of each potential payoff.

Keywords: Cultural Economics, Cultural Finance, Motivated Beliefs, Philosophy & Finance, Context-dependent Beliefs, Trust, Salience

JEL Classification: Z10, Z13, D81, G02