Tuesday, February 21, 2012

ARE SAD PEOPLE MORE RISK ADVERSE?

Is seasonal-affective disorder shaping your investment decisions? To find out, researchers tested the risk aversion with respect to money matters of several hundred people in July 2008, December 2008 and July 2009.
The participants answered questions about depression and other personal characteristics and, at the end of each session, got the option of either walking away with $20 or risking some portion of it to make more money (the boldest bet involved a 50-50 chance to earn $42—or nothing).
The researchers compared people who showed higher levels of depression in winter than summer (the SAD cohort) with those who didn't. Relative to the others, the SAD group became substantially more risk-averse during the winter. Winter gloom may be adding a financial penalty to its emotional toll or, in a tumbling market, helping those with SAD to preserve their capital.
"This Is Your Portfolio on Winter: Seasonal Affective Disorder and Risk Aversion in Financial Decision Making," Lisa A. Kramer and J. Mark Weber, Social Psychological and Personality Science (March)
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