Hostname: page-component-7b9c58cd5d-6tpvb Total loading time: 0 Render date: 2025-03-15T08:47:38.854Z Has data issue: false hasContentIssue false
  • English
  • Français

Risk preferences under acute stress

Published online by Cambridge University Press:  14 March 2025

Jana Cahlíková  and
Lubomír Cingl
Jana Cahlíková
Affiliation:
Department of Public Economics, Max Planck Institute for Tax Law and Public Finance, Marstallplatz 1, 80539 Munich, Germany CERGE-EI, a joint workplace of Charles University in Prague and the Economics Institute of the Czech Academy of Sciences, Politických vězňů 7, 111 21 Prague, Czech Republic
Lubomír Cingl*
Affiliation:
Faculty of Social Sciences, Institute of Economic Studies, Charles University in Prague, Opletalova 26, 110 00 Prague 1, Czech Republic Department of Institutional, Environmental and Experimental Economics, Faculty of Economics, University of Economics in Prague, Nam. Winstona Churchilla 4, 130 67 Prague, Czech Republic
*
[email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Many important decisions are made under stress and they often involve risky alternatives. There has been ample evidence that stress influences decision making, but still very little is known about whether individual attitudes to risk change with exposure to acute stress. To directly evaluate the causal effect of psychosocial stress on risk attitudes, we adopt an experimental approach in which we randomly expose participants to a stressor in the form of a standard laboratory stress-induction procedure: the Trier Social Stress Test for Groups. Risk preferences are elicited using a multiple price list format that has been previously shown to predict risk-oriented behavior out of the laboratory. Using three different measures (salivary cortisol levels, heart rate and multidimensional mood questionnaire scores), we show that stress was successfully induced on the treatment group. Our main result is that for men, the exposure to a stressor (intention-to-treat effect, ITT) and the exogenously induced psychosocial stress (the average treatment effect on the treated, ATT) significantly increase risk aversion when controlling for their personal characteristics. The estimated treatment difference in certainty equivalents is equivalent to 69 % (ITT) and 89 % (ATT) of the gender-difference in the control group. The effect on women goes in the same direction, but is weaker and insignificant.

Keywords

Risk preferencesRisk aversionStressLaboratory stressorTrier social stress testCortisol

JEL classification

D87: Neuroeconomics C91: Laboratory, Individual Behavior D81: Criteria for Decision-Making under Risk and Uncertainty
Type
Original Paper
Information
Experimental Economics , Volume 20 , Issue 1 , March 2017 , pp. 209 - 236
Copyright
Copyright © 2016 Economic Science Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-016-9482-3) contains supplementary material, which is available to authorized users.

References

Allen, AP, Kennedy, PJ, Cryan, JF, Dinan, TG, & Clarke, G (2014). Biological and psychological markers of stress in humans: Focus on the trier social stress test. Neuroscience and Biobehavioral Reviews, 38, 94–124. 10.1016/j.neubiorev.2013.11.005CrossRefGoogle ScholarPubMed
Andersen, S, Harrison, GW, Lau, MI, & Rutström, EE (2006). Elicitation using multiple price list formats. Experimental Economics, 9(4), 383–405. 10.1007/s10683-006-7055-6CrossRefGoogle Scholar
Anderson, LR, & Holt, CA (1997). Information cascades in the laboratory. The American Economic Review, 87(5), 847–862.Google Scholar
Ariely, D, Gneezy, U, Loewenstein, G, & Mazar, N (2009). Large stakes and big mistakes. Review of Economic Studies, 76(2), 451–469. 10.1111/j.1467-937X.2009.00534.xCrossRefGoogle Scholar
Baum, A, Grunberg, NE Cohen, S, Kessler, RC, & Gordon, LU (1997). Measuring stress hormones. Measuring stress: A guide for health and social scientists, chapter 8, Oxford, UK: Oxford University Press 175–192.Google Scholar
Baur, DG, & McDermott, TK (2010). Is gold a safe haven? International evidence. Journal of Banking & Finance, 34(8), 1886–1898. 10.1016/j.jbankfin.2009.12.008CrossRefGoogle Scholar
Bechara, A, Damasio, AR, Damasio, H, & Anderson, SW (1994). Insensitivity to future consequences following damage to human prefrontal cortex. Cognition, 50, 7–15. 10.1016/0010-0277(94)90018-3CrossRefGoogle ScholarPubMed
Becker, A, Deckers, T, Dohmen, T, Falk, A, & Kosse, F (2012). The Relationship Between Economic Preferences and Psychological Personality Measures. Annual Review of Economics, 4(1), 453–478. 10.1146/annurev-economics-080511-110922CrossRefGoogle Scholar
Becker, GM, DeGroot, M, & Marschak, J (1964). Measuring utility by a single response sequential method. Behavioral science, 9(3), 226–232. 10.1002/bs.3830090304CrossRefGoogle ScholarPubMed
Borghans, L, Duckworth, A, Heckman, J, & ter Weel, B (2008). The economics and psychology of personality traits. Journal of Human Resources, 43(4), 972–1059.CrossRefGoogle Scholar
Buckert, M, Schwieren, C, Kudielka, BM, & Fiebach, CJ (2014). Acute stress affects risk taking but not ambiguity aversion. Frontiers in Neuroscience, 8(May), 82.CrossRefGoogle Scholar
Callen, M, Isaqzadeh, M, Long, JD, & Sprenger, C (2014). Violence and risk preference : Experimental evidence. The American Economic Review, 104(1), 123–148. 10.1257/aer.104.1.123CrossRefGoogle Scholar
Cameron, L, Erkal, N, Gangadharan, L, & Zhang, M (2015). Cultural integration : Experimental evidence of convergence in immigrants preferences. Journal of Economic Behavior and Organization, 111, 38–58. 10.1016/j.jebo.2014.11.012CrossRefGoogle Scholar
Capra, CM, Jiang, B, Engelmann, JB, & Berns, GS (2013). Can personality type explain heterogeneity in probability distortions?. Journal of Neuroscience, Psychology, and Economics, 6(3), 151–166. 10.1037/a0033708CrossRefGoogle ScholarPubMed
Cassar, A, Healy, A, & Von Kessler, C (2011). Trust, risk, and time preferences after a natural disaster: Experimental evidence from Thailand, New York: Mimeo.Google Scholar
Charness, G, & Gneezy, U (2012). Strong evidence for gender differences in risk taking. Journal of Economic Behavior & Organization, 83(1), 50–58. 10.1016/j.jebo.2011.06.007CrossRefGoogle Scholar
Chemin, M, Laat, JD, & Haushofer, J (2013). Negative rainfall shocks increase levels of the stress hormone cortisol among poor farmers in kenya, New York: Mimeo.CrossRefGoogle Scholar
Clow, A Jones, F, & Bright, J (2001). The physiology of stress. Stress, myth, theory, and research, Harlow: Pearson Education 47–61.Google Scholar
Coates, JM, & Herbert, J (2008). Endogenous steroids and financial risk taking on a London trading floor. Proceedings of the National Academy of Sciences of the United States of America, 105(16), 6167–72 10.1073/pnas.0704025105Google ScholarPubMed
Cohn, A, Engelmann, J, & Fehr, E (2015). Evidence for countercyclical risk aversion : An experiment with financial professionals. The American Economic Review, 105(2), 860–885. 10.1257/aer.20131314CrossRefGoogle Scholar
Cornelisse, S, van Ast, VA, Haushofer, J, Seinstra, MS, Kindt, M, & Joëls, M (2013). Time-dependent effect of hydrocortisone administration on intertemporal choice, New York: Mimeo.CrossRefGoogle Scholar
Costa, JPT, & McCrae, RR (1992). Normal personality assessment in clinical practice: The NEO personality inventory. Psychological Assessment, 4(1), 5–13. 10.1037/1040-3590.4.1.5CrossRefGoogle Scholar
Croson, R, & Gneezy, U (2009). Gender differences in preferences. Journal of Economic Literature, 47(2), 448–474. 10.1257/jel.47.2.448CrossRefGoogle Scholar
Deck, C., Lee, J., & Reyes, J. (2010). Personality and the consistency of risk taking behavior: Experimental evidence. Chapman Univesity Working Paper, (10–17).Google Scholar
Deck, C, Lee, J, Reyes, J, & Rosen, C (2012). Risk-taking behavior: An experimental analysis of individuals and Dyads. Southern Economic Journal, 79(2), 277–299. 10.4284/0038-4038-2010.026CrossRefGoogle Scholar
Dedovic, K, Rexroth, M, Wolff, E, Duchesne, A, Scherling, C, Beaudry, T, Lue, SD, Lord, C, Engert, V, & Pruessner, JC (2009). Neural correlates of processing stressful information: An event-related fMRI study. Brain research, 1293, 49–60. 10.1016/j.brainres.2009.06.044CrossRefGoogle ScholarPubMed
Dickerson, SS, & Kemeny, ME (2004). Acute stressors and cortisol responses: A theoretical integration and synthesis of laboratory research. Psychological Bulletin, 130(3), 355–391. 10.1037/0033-2909.130.3.355CrossRefGoogle ScholarPubMed
Dohmen, T (2008). Do professionals choke under pressure?. Journal of Economic Behavior and Organization, 65(3–4), 636–653. 10.1016/j.jebo.2005.12.004CrossRefGoogle Scholar
Dohmen, T, & Falk, A (2011). Performance pay and multidimensional sorting: Productivity, preferences, and gender. The American Economic Review, 101(2), 556–590. 10.1257/aer.101.2.556CrossRefGoogle Scholar
Dohmen, T, Falk, A, Huffman, D, & Sunde, U (2010). Are risk aversion and impatience related to cognitive ability?. The American Economic Review, 100(3), 1238–1260. 10.1257/aer.100.3.1238CrossRefGoogle Scholar
Eckel, CC, El-Gamal, MA, & Wilson, RK (2009). Risk loving after the storm: A Bayesian-Network study of Hurricane Katrina evacuees. Journal of Economic Behavior and Organization, 69(2), 110–124. 10.1016/j.jebo.2007.08.012CrossRefGoogle Scholar
Fischbacher, U (2007). Z-TREE: Zurich toolbox for ready-made economic experiments. Experimental Economics, 10(2), 171–178. 10.1007/s10683-006-9159-4CrossRefGoogle Scholar
Foley, P, & Kirschbaum, C (2010). Human hypothalamus-pituitary-adrenal axis responses to acute psychosocial stress in laboratory settings. Neuroscience & Biobehavioral Reviews, 35(1), 91–96. 10.1016/j.neubiorev.2010.01.010CrossRefGoogle ScholarPubMed
Goldberg, LR, Johnson, JA, Eber, HW, Hogan, R, Ashton, MC, Cloninger, CR, & Gough, HG (2006). he international personality item pool and the future of public-domain personality measures. Journal of Research in Personality, 40(1), 84–96. 10.1016/j.jrp.2005.08.007CrossRefGoogle Scholar
Goldstein, DS, & McEwen, BS (2002). Allostasis, homeostats, and the nature of stress. Stress, 5(1), 55–58. 10.1080/102538902900012345CrossRefGoogle ScholarPubMed
Greiner, B Kremer, K, & Macho, V (2004). An online recruitment system for economic experiments. Forschung und wissenschaftliches Rechnen GWDG Bericht, Göttingen: Gesellschaft fur Wissenschaftliche Datenverarbeitung.Google Scholar
Guiso, L, & Paiella, M (2008). Risk aversion, wealth, and background risk. Journal of the European Economic Association, 6(6), 1109–1150. 10.1162/JEEA.2008.6.6.1109CrossRefGoogle Scholar
Guiso, L., Sapienza, P., & Zingales, L. (2013). Time varying risk aversion. NBER Working Paper #19284.CrossRefGoogle Scholar
Haushofer, J, Cornelisse, S, Seinstra, M, Fehr, E, Joëls, M, & Kalenscher, T (2013). No effects of psychosocial stress on intertemporal choice. PLoS One, 8(11), e78597 10.1371/journal.pone.0078597CrossRefGoogle ScholarPubMed
Haushofer, J, & Fehr, E (2014). On the psychology of poverty. Science, 344(6186), 862–867. 10.1126/science.1232491CrossRefGoogle ScholarPubMed
Haushofer, J, & Shapiro, J (2013). Household response to income changes : Evidence from an unconditional cash transfer program in Kenya, Cambridge: Massachusetts Institute of Technology.Google Scholar
Heckman, J. (2011). Integrating personality psychology into economics. National Bureau of Economic Research Working Paper Series, No. 17378.CrossRefGoogle Scholar
Holt, CA, & Laury, SK (2002). Risk aversion and incentive effects. The American Economic Review, 92(5), 1644–1655. 10.1257/000282802762024700CrossRefGoogle Scholar
Kajantie, E, & Phillips, DIW (2006). The effects of sex and hormonal status on the physiological response to acute psychosocial stress. Psychoneuroendocrinology, 31(2), 151–178. 10.1016/j.psyneuen.2005.07.002CrossRefGoogle ScholarPubMed
Kandasamy, N, Hardy, B, Page, L, Schaffner, M, Graggaber, J, Powlson, AS, Fletcher, PC, Gurnell, M, & Coates, J (2014). Cortisol shifts financial risk preferences. Proceedings of the National Academy of Sciences of the United States of America, 111(9), 3608–13 10.1073/pnas.1317908111Google ScholarPubMed
Kaul, A, & Sapp, S (2006). Y2K fears and safe haven trading of the U.S. dollar. Journal of International Money and Finance, 25(5), 760–779. 10.1016/j.jimonfin.2006.04.003CrossRefGoogle Scholar
Kemeny, ME (2003). The psychobiology of stress. Current Directions in Psychological Science, 12(4), 124–129. 10.1111/1467-8721.01246CrossRefGoogle Scholar
Kirschbaum, C, Kudielka, BM, Gaab, J, Schommer, NC, & Hellhammer, DH (1999). Impact of gender, menstrual cycle phase, and oral contraceptives on the activity of the hypothalamus-pituitary-adrenal axis. Psychosomatic Medicine, 61(2), 154–62 10.1097/00006842-199903000-00006CrossRefGoogle ScholarPubMed
Kirschbaum, C, Pirke, KM, & Hellhammer, DH (1993). The “Trier Social Stress Test”—A tool for investigating psychobiological stress responses in a laboratory setting. Neuropsychobiology, 28(1–2), 76–81.CrossRefGoogle Scholar
Kudielka, BM, Hellhammer, DH, & Wüst, S (2009). Why do we respond so differently? Reviewing determinants of human salivary cortisol responses to challenge. Psychoneuroendocrinology, 34(1), 2–18. 10.1016/j.psyneuen.2008.10.004CrossRefGoogle ScholarPubMed
Lejuez, CW, Read, JP, Kahler, CW, Richards, JB, Ramsey, SE, Stuart, GL et al., (2002). Evaluation of a behavioral measure of risk taking: The Balloon Analogue Risk Task (BART). Journal of Experimental Psychology: Applied, 8(2), 75–84.Google ScholarPubMed
Lighthall, NR, Mather, M, & Gorlick, MA (2009). Acute stress increases sex differences in risk seeking in the balloon analogue risk task. PLoS One, 4(7), e6002 10.1371/journal.pone.0006002CrossRefGoogle ScholarPubMed
Malmendier, U, & Nagel, S (2011). Depression babies: Do macroeconomic experiences affect risk taking?. The Quarterly Journal of Economics, 126(1), 373–416. 10.1093/qje/qjq004CrossRefGoogle Scholar
Michl, T., Koellinger, P., & Picot, A. O. (2011). In the mood for risk? An experiment on moods and risk preferences. Ludwig-Maximilians University Working Paper Series.Google Scholar
Miller, R, Plessow, F, Kirschbaum, C, & Stalder, T (2013). Classification criteria for distinguishing cortisol responders from nonresponders to psychosocial stress: evaluation of salivary cortisol pulse detection in panel designs. Psychosomatic Medicine, 75(10), 832–840. 10.1097/PSY.0000000000000002CrossRefGoogle ScholarPubMed
Nguyen, Y, & Noussair, C (2014). Risk aversion and emotions. Pacific Economic Review, 19(3), 296–312. 10.1111/1468-0106.12067CrossRefGoogle Scholar
Oberlechner, T, & Nimgade, A (2005). Work stress and performance among financial traders. Stress and Health, 21(5), 285–293. 10.1002/smi.1063CrossRefGoogle Scholar
Pabst, S, Brand, M, & Wolf, OT (2013). Stress and decision making: A few minutes make all the difference. Behavioural Brain Research, 250, 39–45. 10.1016/j.bbr.2013.04.046CrossRefGoogle ScholarPubMed
Pabst, S, Brand, M, & Wolf, OT (2013). Stress effects on framed decisions: there are differences for gains and losses. Frontiers in Behavioral Neuroscience, 7, 142 10.3389/fnbeh.2013.00142CrossRefGoogle ScholarPubMed
Petzold, A, Plessow, F, Goschke, T, & Kirschbaum, C (2010). Stress reduces use of negative feedback in a feedback-based learning task. Behavioral Neuroscience, 124(2), 248–255. 10.1037/a0018930CrossRefGoogle Scholar
Porcelli, AJ, & Delgado, MR (2009). Acute stress modulates risk taking in financial decision making. Psychological Science, 20(3), 278–283. 10.1111/j.1467-9280.2009.02288.xCrossRefGoogle ScholarPubMed
Roodman, D. (2015). CMP: Stata module to implement conditional (recursive) mixed process estimator. Statistical software components. https://ideas.repec.org/c/boc/bocode/s456882.html.Google Scholar
Schipper, B. (2012). Sex hormones and choice under risk, No. 12, 7. Working Papers, Department of Economics, University of California. http://www.econstor.eu/handle/10419/58361.Google Scholar
Starcke, K, & Brand, M (2012). Decision making under stress: A selective review. Neuroscience and biobehavioral reviews, 36(4), 1228–1248. 10.1016/j.neubiorev.2012.02.003CrossRefGoogle ScholarPubMed
Starcke, K, Wolf, OT, Markowitsch, HJ, & Brand, M (2008). Anticipatory stress influences decision making under explicit risk conditions. Behavioral Neuroscience, 122(6), 1352–1360. 10.1037/a0013281CrossRefGoogle ScholarPubMed
Steyer, R, Schwenkmezger, P, Notz, P, & Eid, M (1997). MDBF-Mehrdimensionaler Befindlichkeitsfragebogen, Göttingen: Hogrefe.Google Scholar
Taylor, SE, Klein, LC, Lewis, BP, Gruenewald, TL, Gurung, RAR, & Updegraff, JA (2000). Biobehavioral responses to stress in females: Tend-and-befriend, not fight-or-flight. Psychological Review, 107(3), 411 10.1037/0033-295X.107.3.411CrossRefGoogle Scholar
Nations, United. (2015). The millennium development goals report. Technical Report, United Nations, New York.Google Scholar
Upper, C. (2000). How Safe Was the“Safe Haven” ? Financial Market Liquidity during the 1998 Turbulences. Discussion paper, Economic Research Group of the Deutsche Bundesbank, 1(February).Google Scholar
van den Bos, R, Harteveld, M, & Stoop, H (2009). Stress and decision-making in humans: Performance is related to cortisol reactivity, albeit differently in men and women. Psychoneuroendocrinology, 34(10), 1449–1458. 10.1016/j.psyneuen.2009.04.016CrossRefGoogle ScholarPubMed
Vieider, FM, Lefebvre, M, Bouchouicha, R, Chmura, T, Hakimov, R, Krawczyk, M, & Martinsson, P (2014). Common components of risk and uncertainty attitudes across contexts and domains: Evidence from 30 countries. Journal of the European Economic Association, 13, 1–32.Google Scholar
von Dawans, B, Fischbacher, U, Kirschbaum, C, Fehr, E, & Heinrichs, M (2012). The social dimension of stress reactivity: Acute stress increases prosocial behavior in humans. Psychological Science, 23(6), 651–660. 10.1177/0956797611431576CrossRefGoogle ScholarPubMed
von Dawans, B, Kirschbaum, C, & Heinrichs, M (2011). The trier social stress test for groups (TSST-G): A new research tool for controlled simultaneous social stress exposure in a group format. Psychoneuroendocrinology, 36(4), 514–522. 10.1016/j.psyneuen.2010.08.004CrossRefGoogle Scholar
Voors, MJ, Nillesen, EEM, Verwimp, P, Bulte, EH, Lensink, R, & Soest, DPV (2012). Violent conflict and behavior: A field experiment in Burundi. The American Economic Review, 102(2), 941–964. 10.1257/aer.102.2.941CrossRefGoogle Scholar
Yesuf, M, & Bluffstone, RA (2009). Poverty, risk aversion, and path dependence in low-income countries: Experimental evidence from Ethiopia. American Journal of Agricultural Economics, 91(4), 1022–1037. 10.1111/j.1467-8276.2009.01307.xCrossRefGoogle Scholar
Young, EA, Abelson, J, & Lightman, SL (2004). Cortisol pulsatility and its role in stress regulation and health. Frontiers in Neuroendocrinology, 25, 69–76. 10.1016/j.yfrne.2004.07.001CrossRefGoogle ScholarPubMed
Supplementary material: File

Cahlíková and Cingl supplementary material

Cahlíková and Cingl supplementary material 1
Download Cahlíková and Cingl supplementary material(File)
File 2 MB
Supplementary material: File

Cahlíková and Cingl supplementary material

Cahlíková and Cingl supplementary material 2
Download Cahlíková and Cingl supplementary material(File)
File 123.2 KB