Investigating risk seeking behaviour under stress

Abstract

People often need to make important social and economic decisions while under the influence of acute stress. Thus, it is crucial to understand how stress affects our decision-making capabilities. While recent research suggests that stress may influence decision-making, it remains inconclusive as to whether any behavioural change can be identified at all. The current study seeks primarily to examine how stress affects risky financial decisions by individuals and evaluates any sexassociated differences. To evaluate how stress affects individual risk attitudes in financial decision-making, we adopted an online experimental survey approach. The 442 individual study participants were randomly assigned by lots to either a stressed condition or a control condition group. The Stroop task was utilised as the stressor, while the control group performed a similar task without the stressful elements. We elicit risk attitudes through two different multiple price list (MPL) designs, namely the Holt and Laury (2002) and Eckel and Grossman (2008) tasks. In the former, each participant is given ten paired lottery choice decisions, wherein either lottery A (safe) or lottery B (risky) must be selected. The Eckel and Grossman task presents the participants with nine distinct gambles, each with a 50/50 probability of either outcome. The first gamble represents a certain payoff, and each subsequent gamble becomes progressively riskier while offering a higher potential reward. Results from both risk elicitation methods reveal that there is no significant difference identified in terms of behaviour between stressed and non-stressed individuals across the overall population. While we were unable to identify any significant behavioural differences between stressed and non-stressed men, we found that women exposed to stress were more risk-averse as compared to the control group for the Holt and Laury lottery (HL) task. While this behaviour is in agreement with a substantial proportion of the literature, we did not find that stress alters female risk-taking behaviour in the EG task.