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Stop the music? The effect of music on risky financial decisions: An experimental study

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  • Israel, Avi
  • Lahav, Eyal
  • Ziv, Naomi

Abstract

Decision-making processes can be influenced by situational factors, affecting risk taking. Background music, which is present in many everyday situations, has been shown to affect cognitive processes by influencing arousal and mood. The aim of the present study was to examine the possible effect of high- and low-arousal music on decision making in the context of financial investments, focusing on two tasks: a lottery-type task and a portfolio-diversification task. Participants were asked to make investment decisions while either high-tempo music, low-tempo music, or no music was played in the background. On the lottery-type task, low-tempo music led to more risky decisions (i.e., more investment in risky assets) than high-tempo or no music. On the portfolio-diversification task, low-tempo music led to more risky decisions (i.e., less diversification) than high-tempo music. Moreover, on both tasks, participants who subjectively perceived the music as helpful made riskier decisions. Results are discussed with regard to gender differences and previous findings.

Suggested Citation

  • Israel, Avi & Lahav, Eyal & Ziv, Naomi, 2019. "Stop the music? The effect of music on risky financial decisions: An experimental study," Journal of Behavioral and Experimental Finance, Elsevier, vol. 24(C).
    • Handle: RePEc:eee:beexfi:v:24:y:2019:i:c:s2214635019300188
    DOI: 10.1016/j.jbef.2019.07.003
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    Cited by:

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    2. Israel, Avi & Rosenboim, Mosi & Shavit, Tal, 2022. "The effect of SMS notifications on time preferences," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 97(C).
    3. Israel, Avi & Rosenboim, Mosi & Shavit, Tal, 2021. "Time preference under cognitive load - An experimental study," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 90(C).
    4. Kumar, Satish & Rao, Sandeep & Goyal, Kirti & Goyal, Nisha, 2022. "Journal of Behavioral and Experimental Finance: A bibliometric overview," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).

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    More about this item

    Keywords

    Behavioral finance; Experimental finance; Background music; Risk preferences; Investments;
    All these keywords.

    JEL classification:

    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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