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Do Affective States Influence Risk Preferences?

Author

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  • Theresa Treffers

    (Private University Seeburg Castle)

  • Philipp D. Koellinger

    (Free University of Amsterdam
    Erasmus University Rotterdam)

  • Arnold Picot

    (Ludwig-Maximilians-Universität)

Abstract

Recent discussions in decision sciences and economics stress the potential impact of affect on decision outcomes. In this study, we conducted incentive-compatible laboratory experiments (N = 253) to investigate whether affect causes temporary fluctuations in risk preferences. In particular, we employed film clips to induce participants into joyful, fearful and sad affective states and subsequently elicited risk preferences by asking the participants to make choices among different lotteries. The financial consequences of the lottery choices varied randomly among the fixed-, low-, and high-stakes treatment groups. We find only weak evidence that affective states influence risk preferences. In particular, we find some evidence that sadness leads to risk aversion, but we find no effects for joy and fear. Our findings question recent claims in the literature that the relationship between affect and risk preferences is strong and unambiguous.

Suggested Citation

  • Theresa Treffers & Philipp D. Koellinger & Arnold Picot, 2016. "Do Affective States Influence Risk Preferences?," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 17(3), pages 309-335, December.
    • Handle: RePEc:spr:schmbr:v:17:y:2016:i:3:d:10.1007_s41464-016-0018-3
    DOI: 10.1007/s41464-016-0018-3
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    Cited by:

    1. Matteo M. Marini, 2022. "20 years of emotions and risky choices in the lab: A meta-analysis," Working Papers 2022/03, Economics Department, Universitat Jaume I, Castellón (Spain).
    2. Miha Dominko & Miroslav Verbič, 2020. "Subjective Quality of Life and Stock Market Participation of the Elderly: A Structural Equation Modelling Approach," Journal of Family and Economic Issues, Springer, vol. 41(3), pages 505-519, September.
    3. Colasante, Annarita & Marini, Matteo M. & Russo, Alberto, 2017. "Incidental emotions and risk-taking: An experimental analysis," MPRA Paper 76992, University Library of Munich, Germany.
    4. Kassas, Bachir & Palma, Marco A. & Porter, Maria, 2022. "Happy to take some risk: Estimating the effect of induced emotions on risk preferences," Journal of Economic Psychology, Elsevier, vol. 91(C).
    5. Matteo M. Marini, 2018. "20 years of emotions and risky choices in the lab: A meta-analysis," Working Papers 2018/14, Economics Department, Universitat Jaume I, Castellón (Spain).
    6. Matteo M. Marini, 2022. "Does gender moderate the influence of emotions on risk-taking? A robustness check," Working Papers 2022/04, Economics Department, Universitat Jaume I, Castellón (Spain).
    7. Lane, Tom, 2017. "How does happiness relate to economic behaviour? A review of the literature," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 68(C), pages 62-78.
    8. Marini, Matteo M., 2022. "Does gender moderate the influence of emotions on risk-taking? The meta-analysis reloaded," Journal of Behavioral and Experimental Finance, Elsevier, vol. 35(C).
    9. Lindner, Thomas & Puck, Jonas & Stocco, Giulia, 2023. "Asymmetric risk perception and firm financing in the institutional envelope," International Business Review, Elsevier, vol. 32(3).
    10. Matteo M. Marini, 2021. "Does gender moderate the influence of emotions on risk-taking? A robustness check," Working Papers 2021/06, Economics Department, Universitat Jaume I, Castellón (Spain).

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