Download - How Hunger Affects our Financial Risk Taking
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How Hunger Affects our Financial Risk Taking‘Metabolic State Alters Economic Decision Making under Risk in Humans’
Symmonds et al. (2010)
Written by: Joanne McGuire, Mair Roberts, Nancy Singh, Simon Stevens & Joe Bell
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Introduction
•Financial decisions are made everyday…
•… But have you ever thought about how hunger might affect your financial decision making???
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Overview• Aim: To asses whether human financial decision
making is affected by hunger and metabolic state.
• Hypothesis: Changes in metabolic state would modulate decision-making and financial risk-taking in humans.
• Prediction: Likely to be more risk-averse after eating a high-calorie meal and more risk-neutral when satiated.
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Method• 19 out of a potential 24 male volunteers
• Mean age: 25±7
• Healthy BMI: 22.6±1.7 kg/m²
• Tests carried out over 3 sessions, each one week apart
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Method Continued…• Each week the lottery task was carried at
different times, pre/post meal
Figure 1
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Method Continued…• Each participant was tested on a sequence of
200 paired lotteries; see Figure 2 below.
• . Figure 2.
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Dependant Variables
•Visual Analogue Scores (VAS)
•Prandial suppression of Acyl-ghrelin
•Circulating Leptin levels
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Results
p = 0.022, r²= 0.22 (n=18)
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Graphs
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Background research
•Extending research on animal foraging behaviours and instinctive reactions of humans.
•Is this study question relevant?
•Utility theory
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Prospect theory
•People are more risk averse over gains
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• Symmonds el at., 2010 ▫Decisions are more risk averse above a metabolic
reference point
Figure S1
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Did the study methods address the most important potential sources of bias?•Systematic bias•Confirmatory bias/ overconfidence?
Bias leads us to seek out information that supports existing instincts or points of view while avoiding contradictory information.
•Sample Size Neglect When results have been generalised to a
population from a less than representative number of data points.
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Was the study performed according to the original protocol?
•Yes – the study protocol was followed apart from the number of participants
•Not all original 25 participants were included in the experiment
•This reduces the potential to generalise findings to real-world situations
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Strengths • Controlled changes in cognition
• Kept all the conditions constant
• Mixed the tests up over 3 weeks so there was no conditioning to tests
• VAS
• Randomized trials to stop habituation
• 14 hour fast is realistic
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Critiques of method•BMI vs. WHR
•Gender
•Providing a 2066 calorie meal isn’t very realistic straight after a fast
•No feedback is given on the results of the lotteries which is not realistic in real life financial risks
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Confounding variables• Whether hunger
affects other variables (eg. mood, emotion, other hormones)
• Boredom
• Stress
• Income
• Occupation
• Age
• Education
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Other Literature•Genetics: Cesarini et al. (2010) have found
that genetic variation accounts for 25% of an individuals risk portfolio
•Gender: It has been found that women are more risk-averse than men (Johnson & Powell, 1994)
•Culture: Hens & Weng (2007) found that there are cultural differences in risk taking
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Other Literature (cont)…• Emotion: Emotional effects can have a large
impact on risky decision-making as Zhao (2006) found.
• Age: Older people tend to take less financial risks than younger people (Jianakoplos & Bernasek, 2006)
• All of these effects show that Symmond’s study cannot be generalised to a population and may lack internal validity as none of these other variables were controlled for.
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How we would investigate this within a student environment
•Bigger sample
•Mixed sample
•Mixed BMIs
•Use an incentive
•Different cultures
•Account for obesity and anorexia
•Take into account losses
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How can it be applied to real life•Dieting and obesity•Are dieters more vulnerable to risky
decision making?
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How can it be applied to real life•Casinos•Snacks vs. meals
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How can it be applied to real life•The importance of breakfast
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Conclusions •Symmonds et al’s experiment showed that
metabolic states affect financial risk-taking
•Addressing a new line of research and extending previous studies on animal behaviours.
•However, the experimental method is flawed and results appear slightly ambiguous
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References
• Byrnes, J. P., Miller, D. C., Schafer, w. D. (1999). Gender differences in risk taking: A meta-analysis. Psychological Bulletin, 125(3), 367-383.
• Cesarini, D., Johannesson, M., Lichtenstein, P., Sandewall, O., & Wallace, B. (2010). Genetic variation in financial decision making. Journal of Finance, 65(5), 1725-1754.
• Comings, D,E., Rosenthal, R,J., Lesieur ,H,R., Rugle, L,J., Muhleman, D., Chiu, C., Dietz,G., & Gade, R. (1996). A study of the dopamine D2 receptor gene in pathological gambling. Pharmacogenetics ,6(3), 223-34
• Dwyer ,p., Gilkeson, J., & List, J. (2001). Gender differences in revealed risk taking: evidence from mutual fund investors. Economics Letters 76, 151-158
• Eckel, C. C., & Grossman, P. J. (2002). Sex differences and statistical stereotyping in attitudes towards financial risk. Evolution and Human Behavior, 23(4), 281-295.
• Hens, T., & Weng, M. (2007). Does Finance have a cultural Dimension? FINRISK Working Paper, 377.
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References Cont…• Hill, A,J., Weaver, C,F., & Blundell, J,E. (1991). Food craving, dietary restraint
and mood. Appetite ,17(3), 187-97.
• Hunton, J., Hall, T., & Price, K (1998). The value of voice in participative decision making. Journal of Applied Psychology, 83 (5), 788-797
• Johnson, J., & Powell, P. (1994). Decision Making, Risk and Gender: Are managers different? British Journal of Management, 5(2), 123-138.
• Kahneman, D., & Tversky, A. (1979) "Prospect Theory: An Analysis of Decision under Risk", Econometrica, XLVII, 263-291.
• Powell, M., & Ansic, D. (1997). Gender differences in risk behaviour in financial decision-making: An experimental analysis. Journal of Economic Psychology, 18, 605-628.
• Schubert, R., Brown, M., Gysler, M., & Brachinger, H. (1999). Financial Decision-Making: Are Women Really More Risk-Averse? An American Economic Review, 89(2), 381-385.
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References Cont…• Symmonds, M., Emmanuel, J. J., Drew, M. E., Batterham, R. L., & Dolan, R. J.
(2010). Metabolic State Alters Economic Decision Making under Risk in Humans. PLoS One, 5(6), e11090.
• Vroom, V, H., & Pahl, B. (1971). Relationship between age and risk taking among managers. Journal of Applied Psychology, 55 (5), 399-405.
• http://www.alexwhittaker.org/?p=26