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Emotions and Risk Attitudes

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  • Armando N. Meier

Abstract

Previous work has shown that preferences are not always stable across time, but surprisingly little is known about the reasons for this instability. I examine whether variation in people's emotions over time predicts changes in risk attitudes. Using a large-panel dataset, I identify happiness, anger, and fear as significant correlates of within-person changes in risk attitudes. Robustness checks indicate a limited role for alternative explanations. An event study around the death of a parent or child further confirms a large relationship between emotions and risk attitudes.

Suggested Citation

  • Armando N. Meier, 2022. "Emotions and Risk Attitudes," American Economic Journal: Applied Economics, American Economic Association, vol. 14(3), pages 527-558, July.
    • Handle: RePEc:aea:aejapp:v:14:y:2022:i:3:p:527-58
    DOI: 10.1257/app.20200164
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    Cited by:

    1. AsleBagh, Pegah & Bonyadi Naeini, Ali & Moeeni, MohammadReza, 2024. "Investigating the effect of three different factors including experience, personality and color on the decision-making process in stock markets using EEG," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 109(C).
    2. Valentina Alvarez-Saavedra & Pierre Levasseur & Suneha Seetahul, 2023. "The Role of Gender Inequality in the Obesity Epidemic: A Case Study from India," Journal of Development Studies, Taylor & Francis Journals, vol. 59(7), pages 980-996, July.
    3. Sébastien Foudi, 2024. "Are risk attitude, impatience, and impulsivity related to the individual discount rate? Evidence from energy-efficient durable goods," Theory and Decision, Springer, vol. 96(4), pages 627-661, June.
    4. Nicolás Salamanca & Buly A. Cardak & Edwin Ip & Joe Vecci, 2023. "Time-stability of risk preferences: A new approach with evidence from developed and developing countries," Discussion Papers 2305, University of Exeter, Department of Economics.
    5. Andrew E Clark & Rong Zhu, 2024. "Taking Back Control? Quasi-Experimental Evidence on the Impact of Retirement on Locus of Control," The Economic Journal, Royal Economic Society, vol. 134(660), pages 1465-1493.
    6. Sumit S. Deole & Yue Huang, 2024. "Suffering and prejudice: do negative emotions predict immigration concerns?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 37(2), pages 1-39, June.
    7. Björn Bos & Moritz A. Drupp & Jasper N. Meya & Martin F. Quaas, 2023. "Financial Risk-Taking under Health Risk," CESifo Working Paper Series 10387, CESifo.
    8. Samahita, Margaret & Holm, Håkan J., 2023. "No mood effects in the field: The case of car inspections," Journal of Economic Psychology, Elsevier, vol. 96(C).
    9. Robert Finger & David Wüpper & Chloe McCallum, 2023. "The (in)stability of farmer risk preferences," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(1), pages 155-167, February.
    10. Yau‐Huo (Jimmy) Shr & Feng‐An Yang, 2023. "Public health crisis and risky road behaviors," Health Economics, John Wiley & Sons, Ltd., vol. 32(6), pages 1205-1219, June.
    11. Gruener, Sven, 2022. "The economic psychology of climate change: An experimental study on risk preferences and cooperation," OSF Preprints jq57n, Center for Open Science.
    12. Diarmaid Ó Ceallaigh & Kirsten I.M. Rohde & Hans van Kippersluis, 2024. "Skipping your workout, again? Measuring and understanding time inconsistency in physical activity," Tinbergen Institute Discussion Papers 24-028/V, Tinbergen Institute.
    13. Johanna Etner & Meglena Jeleva & Olivier Renault, 2024. "Dynamic decision-making when ambiguity attitudes depend on exogenous events," Theory and Decision, Springer, vol. 96(2), pages 269-295, March.
    14. López-Guzmán, Silvia & Sautua, Santiago I., 2024. "Effects of a fearful emotional state on financial decisions in the presence of prior outcome information," Journal of Economic Psychology, Elsevier, vol. 101(C).
    15. Mujcic, Redzo & Powdthavee, Nattavudh, 2022. "How Do Humans Respond to Huge Financial Losses?," IZA Discussion Papers 15536, Institute of Labor Economics (IZA).

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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