Deck 5: How Environmental Factors Impact Financial Decisions; the Personality of a Successful Investor

Question 1

How does the weather affect mood?

Answer 1

Most people are happier and more optimistic when there is sunshine compared to rain and clouds. This is also seen through Twitter posts, altruistic behavior, restaurant tipping, depression and suicide. Sunshine causes the brain to increase a neurotransmitter called serotonin. Serotonin relays signals between neurons in the brain that regulate happiness, anxiety, and other facets of mood, as well as bowel function, clotting, bone density, and sexual function. Low levels of serotonin, which may be caused by lack of sunshine among many other causes, leads to less happiness, higher anxiety, depression, and difficulty sleeping. Conversely, darkness or darker lighting causes the body to produce a hormone called melatonin which is produced by the pineal gland. Melatonin is often called the sleep hormone as it influences your circadian rhythm. A rise in melatonin levels tells the body that it is time to sleep. Further, melatonin binds to brain receptors to reduce nerve activity and dopamine levels that are trying to keep the body alert and awake

Question 2

How does the weather impact financial decisions?

Answer 2

Sunshine leads to
More risk taking
Higher stock returns
Perceiving stocks as better buys
Seasonal affective disorder leads to
Less risk taking
Lower stock returns
Lower risk premium
Higher bid ask spreads
Stock analyst to be more pessimistic
Higher IPO underpricing

Question 3

How does air pollution effect the brain?

Answer 3

As air pollution comes through the respiratory system, it inflames the neurons and creates oxidative stress, which is the imbalance between free radicals and antioxidants in the body. This inflammation and oxidative stress, in turn, can change the function of mitochondrial DNA leading to damaged cells that replicate too slowly or incorrectly due to the lack of energy production from the mitochondria. In turn, this can cause brain damage and diseases such as Parkinson's or Alzheimer's, pulmonary and cardiovascular diseases or many different forms of cancer.

Question 4

How does air pollution affect the stock market?

Question 5

What are noncognitive traits and what are a few examples?

Question 6

How do the big 5 personality traits relate to financial decisions of investors and corporate executives?

Question 7

How do the dark triad of personality traits relate to the business industry and financial decisions?

Question 8

How are overconfidence and optimism related to financial decisions?