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

Avi Israel, Eyal Lahav and Naomi Ziv

Journal of Behavioral and Experimental Finance, 2019, vol. 24, issue C

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.

Keywords: Behavioral finance; Experimental finance; Background music; Risk preferences; Investments (search for similar items in EconPapers)
JEL-codes: G41 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:24:y:2019:i:c:s2214635019300188

DOI: 10.1016/j.jbef.2019.07.003

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