Fear, Social Projection, and Financial Decision Making S123
the impact of fear on risk taking. Some evidence suggeststhat properties of the evaluated object can moderate theimpact of speciﬁc emotions on risk estimates. For example,DeSteno et al. (2000) ﬁnd that sadness and anger led todifferent probability estimates of sad and angering events.In this case, however, they focused exclusively on the emo-tional ﬁt between the individual and the event and reliedon affect-as-information to explain the interaction.Along the same lines, social projection implies that notonly the level of uncertainty but also the features of theuncertainty (e.g., the features of the market) may moderatethe role of fear on ﬁnancial decision making. More pre-cisely, features that make an investor less (vs. more) likelyto project his or her fear-based action tendencies—holdingconstant the initial level of uncertainty—are less likely toinﬂuence his or her risk-taking decisions. Furthermore, fea-tures that are believed to move in an opposite manner rela-tive to oneself may even produce contrasting effects on risk taking (i.e., make a scared investor more of a risk taker).In Experiments 2 and 3, we manipulate the features of the market simulation across conditions to address thesepossibilities. In Experiment 2, we take the extreme case tomitigate social projection such that the value of the stock iseither peer generated (everybody’s decision in the room) orcomputer generated. Because people are unlikely to believethat a computer will share their emotions and action tenden-cies, we expect the computer condition to mitigate socialprojection and thus reduce the impact of incidental fear onthe decision to sell. It is worth noting that this approachhas been successfully used to conﬁrm that an observedeffect is not simply a risk-taking/averse reaction. For exam-ple, Kosfeld et al. (2005) show that oxytocin increased theamount of money sent to the trustee in the trust game, butonly when the trustee was another person. The impact of oxytocin disappeared when the trustee was a computer. Fol-lowing a similar approach and rationale, we hypothesizethat fear will not lead to a general risk-averse decision.
: When participants are told that the other participants inthe market determine the value of the stock, fearful (vs.control) participants will sell their stock earlier. When par-ticipants are told that a computer determines the value of the stock, the impact of incidental fear on selling behaviorwill not occur.
To assess the impact of social projection on judgment anddecision making, researchers have traditionally manipulatedparticipants’ perceptions of trait (dis)similarity betweenthemselves and others: “Typically, participants complete apsychometric task and then receive feedback regarding theirgroup membership” (Robbins and Krueger 2005, p. 33). Thebeneﬁt of this type of manipulation is that experimenterscan vary a trait of interest (e.g., others’ risk attitudes) whileholding constant other traits and aspects of the target object.In Experiment 3, through an ostensible risk attitude survey,we lead participants to believe that their own risk attitude is
very unique among the players in theroom. Within this scenario, we hypothesize the following:
: When led to believe that their risk attitude is commonin the market, fearful (vs. control) participants will selltheir stock earlier. When participants are led to believethat their risk attitude is unique in the market, the impactof incidental fear on early selling behavior will not occuror even reverse.
The reversal would be possible in case participants usedthe “unique risk attitude” information to infer that otherswould be inclined to do the exact opposite of what theywanted to do (e.g., “If I feel like selling, it means thatothers will probably not sell. So, I’ll stay.”).Across all three experiments, we use video exposure tomanipulate incidental fear. In the fear condition, the con-tents of horror videos vary across the experiments to ensurethat a particular content of one particular fear-inducingvideo is not responsible for the effects. In the control con-dition, the videos across the experiments vary not only bycontent but also by intensity (i.e., arousal). Both video con-ditions were run in every experimental session. As part of a “movie preference” cover story, participants were explic-itly told that they would be randomly assigned to differentmovie genres, and two genres (i.e., horror and control) wereactually played across participants within a session.
The goal of this experiment is to test the intuition thatfear leads to selling in the stock market context (H
). Afterthe emotion manipulation, participants played a stock mar-ket simulation. Of their $15 participation fee, $10 was con-verted into a stock. Participants’ main task was to decideon when to sell the stock.
Method Sample and design.
Eighty students participated in theexperiment in exchange for an expected $15 participationfee. The experiment employed a two-level (emotion: fearvs. neutral) single-factor between-subjects design. Threeexperimental sessions were conducted with 26, 27, and 27participants, respectively.
Participants came to the lab and wereassigned to one of the cubicles equipped with a laptopcomputer and a headset. They were then introduced toostensibly two independent studies: “Study 1: Video Eval-uation Task” and “Study 2: Financial Decision-MakingTask.” They were told that given the short length of timefor each study, both would be conducted in the same ses-sion (a common practice in this lab). The entire sessionlasted approximately 40 minutes.
Video exposure is a widely usedand relatively effective incidental emotion manipulation(Rottenberg, Ray, and Gross 2007; Westermann et al.1996). Therefore, in Study 1, participants were informedthat the purpose of the study was to investigate people’spreferences for different movie genres. Precisely, they wereprovided with the following information: “You will be pre-sented with a sequence of two video clips from the samegenre. There can be dramas, comedies, sitcoms, actions,documentaries, horror movies, etc. A few general ques-tions will be asked after the videos.” This instruction con-veyed the information that different videos could be pre-sented to different participants. Indeed, both genres wererun in every experiment session. In the control condition,scenes from two documentaries were presented (
Vincent Van Gogh
), and in the fear condi-tion, participants were exposed to scenes from two horror