Dynamics of stock market developments, financial behavior, and emotions

Henning Cordes, Sven Nolte and Judith C. Schneider

Journal of Banking & Finance, 2023, vol. 154, issue C

Abstract: We explore in a series of incentivized experiments how stock market developments affect emotional arousal (proxied by pupil dilation, electrodermal activity, and heart rate variation), and how this emotional arousal affects investment behavior. Experiencing stock market downswings increases emotional arousal, while upswings do not trigger such an effect. The subsequent interplay between emotional arousal and investment behavior is by no means one-dimensional. The heightened level of emotional arousal after downswings reduces financial risk taking and thus the money put at stake, while the exposure to financial risks itself increases subsequent emotional arousal.

Keywords: Emotional arousal; Investment behavior; Visualizations (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:154:y:2023:i:c:s0378426622002916

DOI: 10.1016/j.jbankfin.2022.106711

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