Happy to take some risk: Estimating the effect of induced emotions on risk preferences

How do emotions influence one’s willingness to take on risk? We show that answering this question can be particularly challenging because induced emotions are highly sensitive to a respondent’s contemporaneous experiences and can be rapidly diluted while respondents answer subsequent survey questions. We randomly assign respondents to one of three emotion-inducing videos (positive, negative, and neutral), and we also randomize whether subjects complete a self-assessment survey tool measuring emotions prior to completing risk preference elicitation tasks and immediately after watching the emotion-inducing video. We verify changes in emotions for all respondents by using facial expression analysis software. Respondents who watched a positive video and skipped the emotion-measuring survey were less risk averse, particularly in the first of two preference elicitation tasks. Our findings indicate that estimates of how induced emotions affect risk aversion may be attenuated by including any intermediate tasks, including a survey to measure such emotions.