Emotional influences on financial decision-making

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School of Business | Master's thesis
Degree programme
39 + 14
In this thesis I study whether an external emotional intervention can bias participants’ emotional state and whether participants differ in their financial decision-making depending on the intervention they receive. For this, I build on the framework of the somatic marker hypothesis, which provides a mechanism for how emotions influence decision-making. Previous research has found that individuals in a negative emotional state make less optimal decisions in a gambling and investing task than individuals in an emotionally neutral state and that emotions unrelated to the task at hand can impede decision-making. The study is conducted through an online survey. My sample consists of 79 individuals (49% males, 47% females) of mostly Finnish (49%) or Swiss (41%) nationality. The majority of participants hold a master’s degree (57%), have completed finance, business, or economics studies (61%), and have some personal investment experience (61%). I randomly split participants into two equally sized intervention groups. Each group receives an intervention of either five different emotionally positive or negative pictures and participants’ emotional state is assessed before and after the intervention. Participants then complete a financial decision-making certainty equivalents questionnaire, having to choose between a constant gamble or a monotonously increasing fixed payoff in each question. I analyse the intervention’s effectiveness as well as intergroup differences in financial decision-making using non-parametric statistical tests. While the intervention shifted participants’ emotional state in the intended direction and groups differ in their post intervention emotional state, I find no difference between groups in financial decision-making. There is, however, weak evidence of an association between post intervention emotional state and choice in the financial decision-making task in the group receiving the negative intervention. I am unable to determine a causal effect for this relationship. Overall, there is no consistent evidence of a relationship between emotional state and financial decision-making. This stands indirectly in contrast to prior studies’ findings.
Thesis advisor
Rantapuska, Elias
somatic marker hypothesis, financial decision-making, neurofinance, emotions
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