Risk Aversion and Emotions

Abstract: We consider the relationship between emotions and decision-making under risk. Specifically, we examine the emotional correlates of risk-averse decisions. In our experiment, individuals' facial expressions are monitored with facereading software, as they are presented with risky lotteries. We then correlate these facial expressions with subsequent decisions in risky choice tasks. We find that the valence of one’s emotional state is negatively correlated, and the strength of a number of emotions: fear, happiness, anger, and surprise, is positively correlated, with risk-averse decisions.