University College Dublin (UCD) – Geary Institute and Department of Economics
Harvard University – Department of Population and International Health
Colm P. Harmon
University of Sydney – School of Economics; Institute for the Study of Labor (IZA)
IZA Discussion Paper No. 8060
The ways in which preferences respond to the varying stress of economic environments is a key question for behavioral economics and public policy. We conducted a laboratory experiment to investigate the effects of stress on financial decision making among individuals aged 50 and older. Using the cold pressor task as a physiological stressor, and a series of intelligence tests as cognitive stressors, we find that stress increases subjective discounting rates, has no effect on the degree of risk-aversion, and substantially lowers the effort individuals make to learn about financial decisions.