Let the Sunshine In? The Effects of Luminance on Economic Preferences, Choice Consistency and Dominance Violations

Abstract

Weather, in particular the intensity and duration of sunshine (luminance), has been shown to significantly affect financial markets. Yet, because of the complexity of market interactions we do not know how human behavior is affected by luminance in a way that could inform theoretical choice models. In this paper, we use data from a field study using an incentive-compatible, decision task conducted daily over a period of two years and from the US Earth System Research Laboratory luminance sensor to investigate the impact of luminance on risk preferences, ambiguity preferences, choice consistency and dominance violations. We find that luminance levels affect all of these. Age and gender influence the strength of some of these effects.

Ergodicity-Breaking Reveals Time Optimal Economic Behavior in Humans

“…However, there are a diversity of empirical demonstrations of preference instability. In animals, including humans, there is evidence suggesting that risk preferences depend on homeostatic 20,21,22,23 , circadian 24 , and affective states 25 . Test-retest stability in the same settings, though typically reported as modest 26 , can be relatively high when estimated using hierarchical models of the sort used here 27 .…”

Sentimental Business Cycles

“…Starting from Elster (1998), several studies, especially in finance, highlight the role of emotions in economic behaviour (see e.g. Hirshleifer and Shumway, 2003;Edmans, Garcia and Orli, 2007;Glimcher and Tymula, 2017). The evidence on the link between mass shootings and psychological well-being and between optimism and economic choices, offers a potential channel through which mass shootings impact on survey evidence on consumer confidence about the US economy.…”