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DEEP sleep: The impact of sleep on financial risk taking

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  • John R. Nofsinger
  • Corey A. Shank

Abstract

In this paper, we examine the relationship between sleep and financial risk taking. The results indicate that individuals who have better sleep display less distortion of probability, are less susceptible to the present bias, and have a lower discounting rate. Specifically, individuals with better self‐reported sleep quality have less distortion of probability, a more curved utility function, and are less loss averse, while those with fewer sleep disturbances display less probability distortion and have more curvature in their utility function. Overall, the results show that there are cognitive deficits in financial decision making by having poor sleep habits that can have important consequences.

Suggested Citation

  • John R. Nofsinger & Corey A. Shank, 2019. "DEEP sleep: The impact of sleep on financial risk taking," Review of Financial Economics, John Wiley & Sons, vol. 37(1), pages 92-105, January.
    • Handle: RePEc:wly:revfec:v:37:y:2019:i:1:p:92-105
    DOI: 10.1002/rfe.1034
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    Cited by:

    1. Alok Kumar, 2019. "The changing landscape of behavioral finance," Review of Financial Economics, John Wiley & Sons, vol. 37(1), pages 3-5, January.
    2. Fidanoski, Filip & Johnson, Timothy, 2023. "A z-Tree implementation of the Dynamic Experiments for Estimating Preferences [DEEP] method," Journal of Behavioral and Experimental Finance, Elsevier, vol. 38(C).

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