Decision-dependent emotions and behavioral anomalies

The influence of emotions on decision making is widely accepted, particularly in relation to incidental emotions and moods. The influence of specific emotions integral to a decision is, perhaps, less explored. Explanations of many behavioral anomalies exist that exclude such emotions as important elements, but this may be an oversight – might it be that specific emotions are necessary causes for such behaviors rather than merely playing a supporting role? In this paper we investigate this issue experimentally, using as an example a robust behavioral anomaly in the finance area: the disposition effect, which is generally explained in terms of prospect theory. By manipulating the emotions evoked by an investment task in five studies we show that specific emotional responses are necessary causes of this effect. We provide evidence, therefore, that the specific emotions associated with tasks may play a more important role than previously recognized in some behavioral anomalies.