The Weird Factor That Makes People More Likely to Make Bad Financial Decisions
From your checking account balance to your credit score to the current climate of the stock market -- there are a number of factors that influence a person’s financial choices. And it turns out, the sun might be one of them.
Of course, when you think of money management and financial decision-making, the last thing that comes to mind is the weather. However, it turns out that burning ball of hydrogen about 92 million miles from us may actually have some influence on our financial decisions.
Conducting a two-year study, researchers from the University of Sydney and New York University sought to understand how sunshine and light can affect a person’s monetary decisions. The result? When light is brighter, people are less likely to take chances with their money when they know what risks are involved.
The researchers analyzed 2,530 people who each made 40 monetary decisions through touch screens placed at the National Academy of Science Museum in Washington, D.C. On bright days, the majority of participants chose to take a guaranteed $5 payout rather than risk a 50 percent chance at $20. However, when the chances of getting the $20 were unknown, more people were willing to take the risk -- on sunny days.
“On the days with higher light intensity, people made worse decisions and they were more inconsistent in the choices that they made,” explains University of Sydney associate professor and study co-author Agnieszka Tymula.
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So next time you’re making a major financial decision with risk involved, try tweaking the light in your environment. However, the researchers found that their discoveries could go beyond personal decision-making. “Manipulating the indoor luminance levels -- the overhead light intensity -- in markets like the New York Stock Exchange ought to have an effect on market volatility and risk premiums,” the study concludes.