Effects of a fearful emotional state on financial decisions in the presence of prior outcome information

Silvia López-Guzmán and Santiago I. Sautua

Journal of Economic Psychology, 2024, vol. 101, issue C

Abstract: Negative emotions have been shown to influence financial risk-taking. However, how receiving salient information about prior outcomes interacts with a decision-maker’s emotional state is not well known. In a laboratory experiment, we induced a fearful emotional state to investigate its effects on financial investment when outcome probabilities are unknown but decision-makers observe prior outcomes. The effects of fear on investment depended on whether the sequence of previous outcomes was favorable or unfavorable and contained weak or strong information. Our findings suggest that fear affected investment, at least in part, through changes in expectations of success.

Keywords: Uncertainty; Information; Emotions; Expectations; Risk-taking (search for similar items in EconPapers)
JEL-codes: C91 D83 D91 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:101:y:2024:i:c:s016748702400014x

DOI: 10.1016/j.joep.2024.102706

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