Affect, Risk-Taking, and Financial Decisions: Investigating the Psychological and Neural Mechanisms By Which Conscious and Unconscious Affective Processes Influence Decisions.

Abstract

This dissertation consists of three studies designed to elucidate the psychological and neural mechanisms by which affect influences risk-taking in financial decisions. The mechanisms underlying conscious and unconscious affective processes are investigated using multiple methods and approaches from personality and social psychology, cognitive psychology, and affective neuroscience. Results show that affect plays a crucial role in financial decisions and that there may be two interactive systems by which affect influences decisions. The unconscious system exerts valence-based effects on decisions, responds preferentially to implicit measures and implicitly processed affective cues, and is likely mediated predominantly by subcortical brain structures. The conscious system exerts emotion-specific effects on decisions, responds preferentially to explicit measures and mood induction methods that result in more lasting changes in affect, and is likely mediated predominantly by cortical brain structures. Study 1 uses fMRI to examine the effects of subliminally and supraliminally presented positive and negative affective primes on financial risk-taking and neural markers of anticipatory arousal. Results show that happy facial expressions increase financial risk-taking and activation in the nucleus accumbens, an effect that was significantly stronger in unconscious than conscious conditions. Study 2 tests valence-based and emotion-specific theories of risk by using affective primes of the same valence, fearful and angry faces, presented at 3 stimulus durations (subliminal, short, long) and examining their effect on financial risk-taking. Results show that both fearful and angry faces reduce financial risk-taking after short stimulus presentations, but only fearful faces reduce financial risk-taking after long stimulus presentations. Study 3 investigates the role of individual differences in affect on financial risk-taking using implicit versus explicit measures of affect. Individuals high in negative affect as measured through two versions of a mood implicit association test made more safe bond choices on an investment task whereas explicit measures of individual differences in affect had no effect on financial risk-taking. Taken together, these findings provide support for the idea of a dual process model of risk.

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