Affect Heuristic Research Articles

Asymmetric return–volatility relation around the clock

AbstractThis study examines the return‐realized volatility (RV) relation at daily and intraday frequencies. Using daily data, we find the contemporaneous return is the dominating factor for RV, which is in support of the behavioral explanation. For intraday data, we further find a significantly positive (negative) relation between contemporaneous positive (negative) return and RV, which is consistent with prospect theory. Quantile regression analysis documents a U‐shaped (inverted U‐shaped) contemporaneous return‐volatility relation for positive (negative) returns across volatility quantiles during the daytime trading period. In addition, we find the affect heuristic is more aggressive at overnight trading period.

The Affect Heuristic and Risk Perception - Stability Across Elicitation Methods and Individual Cognitive Abilities.

The reliance on feelings when judging risks and benefits is one of the most fundamental valuation processes in risk perception. Although previous research suggests that the affect heuristic reliably predicts an inverse correlation between risk and benefit judgments, it has not yet been tested if the affect heuristic is sensitive to elicitation method effects (joint/separate evaluation) and to what extent individual differences in cognitive abilities may mediate the risk–benefit correlation. Across two studies we find that (1) the risk–benefit correlation is stable across different elicitation methods and for different domains (e.g., social domain, sensation-seeking domain, health domain, economic domain) and (2) the strength of the inverse correlation is tied to individual cognitive abilities—primarily cognitive reflection ability.

Insights into Flood Risk Misperceptions of Homeowners in the Dutch River Delta.

Flooding is one of the most significant natural disasters worldwide. Nevertheless, voluntary take‐up of individual damage reduction measures is low. A potential explanation is that flood risk perceptions of individual homeowners are below objective estimates of flood risk, which may imply that they underestimate the flood risk and the damage that can be avoided by damage reduction measures. The aim of this article is to assess possible flood risk misperceptions of floodplain residents in the Netherlands, and to offer insights into factors that are related with under‐ or overestimation of perceived flood risk. We analyzed survey data of 1,848 homeowners in the Dutch river delta and examine how perceptions of flood probability and damage relate to objective risk assessments, such as safety standards of dikes, as well as heuristics, including the availability heuristic and the affect heuristic. Results show that many Dutch floodplain inhabitants significantly overestimate the probability, but underestimate the maximum expected water level of a flood. We further observe that many respondents apply the availability heuristic.

Risk as affect: The affect heuristic in cybersecurity

Risk perception is an important driver of netizens’ (Internet users’) cybersecurity behaviours, with a number of factors influencing its formation. It has been argued that the affect heuristic can be a source of variation in generic risk perception. However, a major shortcoming of the supporting research evidence for this assertion is that the central construct, affect, has not been measured or analysed. Moreover, its influence in the cybersecurity domain has not yet been tested. The contribution of the research reported in this paper is thus, firstly, to test the affect heuristic while measuring its three constructs: affect, perceived risk and perceived benefit and, secondly, to test its impact in the cybersecurity domain. By means of two carefully designed studies (N = 63 and N = 233), we provide evidence for the influence of the affect heuristic on risk perception in the cybersecurity domain. We conclude by identifying directions for future research into the role of affect and its impact on cybersecurity risk perception.

Comparing the effects of behaviorally informed interventions on flood insurance demand: an experimental analysis of ‘boosts’ and ‘nudges’

AbstractThis paper compares the effects of two types of behaviorally informed policy – nudges and boosts – that are designed to increase consumer demand for insurance against low-probability, high-consequence events. Using previous findings in the behavioral sciences literature, this paper constructs and implements two nudges (an ‘informational’ and an ‘affective’ nudge) and a statistical numeracy boost and then elicits individual risk beliefs and demand for flood insurance using a contingent valuation survey of 331 participants recruited from an online labor pool. Using a two-limit Tobit model to estimate willingness to pay (WTP) for flood insurance, this paper finds that the affective and informational nudges result in increases in WTP for flood insurance of roughly $21/month and $11/month relative to the boost, respectively. Taken together, the findings of this paper suggest that nudges are the more effective behaviorally informed policy in this setting, particularly when the nudge design targets the affect and availability heuristics; however, additional research is necessary to establish sufficient conditions for this conclusion.

Names and titles matter: The impact of linguistic fluency and the affect heuristic on aesthetic and value judgements of music.

It has been shown that titles influence peoples’ evaluation of visual art. However, the question of whether titles and artist names affect listeners when evaluating music has not yet been investigated. By using two well-known cognitive heuristics, the authors investigated whether names presented with music pieces influenced aesthetic and value judgments of music. Experiment 1 (N 48) focused on linguistic fluency. The same music excerpts were presented with easy-to-pronounce (fluent) and difficult-to-pronounce (disfluent) names. Experiment 2 (N 100) studied the affect heuristic. The same music excerpts were presented with positive (e.g., Kiss), negative (e.g., Suicide), and neutral (e.g., Window) titles. In both studies, aesthetic and value judgments of music were significantly influenced by the linguistic manipulation of the names. Participants in Experiment 1 evaluated the same music more positively when presented with fluent names compared to disfluent names. In Experiment 2, presenting the music with negative titles resulted in the lowest judgments. Moreover, music excerpts presented with neutral and negative titles were remembered significantly more often than positive titles. Finally, a comparison of the music presented with and without titles indicated that music excerpts were more liked in the presence of titles than in their absence. The present research shows different ways in which aesthetic and value judgments can be influenced by the names presented with music. Results suggest that like any other human judgment, evaluations of music also rely on heuristic principles that do not necessarily depend on the aesthetic stimuli themselves.

Machines versus humans: People’s biased responses to traffic accidents involving self-driving vehicles

Although self-driving vehicles (SDVs) bring with them the promise of improved traffic safety, they cannot eliminate all crashes. Little is known about whether people respond crashes involving SDVs and human drivers differently and why. Across five vignette-based experiments in two studies (total N = 1267), for the first time, we witnessed that participants had a tendency to perceive traffic crashes involving SDVs to be more severe than those involving conventionally human-driven vehicles (HDVs) regardless of their severity (injury or fatality) or cause (SDVs/HDVs or others). Furthermore, we found that this biased response could be a result of people’s reliance on the affect heuristic. More specifically, higher prior negative affect tagged with an SDV (vs. an HDV) intensifies people’s negative affect evoked by crashes involving the SDV (vs. those involving the HDV), which subsequently results in higher perceived severity and lower acceptability of the crash. Our results imply that people’s over-reaction to crashes involving SDVs may be a psychological barrier to their adoption and that we may need to forestall a less stringent introduction policy that allows SDVs on public roads as it may lead to more crashes that could possibly deter people from adopting SDVs. We discuss other theoretical and practical implications of our results and suggest potential approaches to de-biasing people’s responses to crashes involving SDVs.

The Influence of Feelings While Driving Regular Cars on the Perception and Acceptance of Self-Driving Cars.

Self-driving vehicles will affect the future of transportation, but factors that underlie perception and acceptance of self-driving cars are yet unclear. Research on feelings as information and the affect heuristic has suggested that feelings are an important source of information, especially in situations of complexity and uncertainty. In this study (N = 1,484), we investigated how feelings related to traditional driving affect risk perception, benefit perception, and trust related to self-driving cars as well as people's acceptance of the technology. Due to limited experiences with and knowledge of self-driving cars, we expected that feelings related to a similar experience, namely, driving regular cars, would influence judgments of self-driving cars. Our results support this assumption. While positive feelings of enjoyment predicted higher benefit perception and trust, negative affect predicted higher risk and higher benefit perception of self-driving cars. Feelings of control were inversely related to risk and benefit perception, which is in line with research on the affect heuristic. Furthermore, negative affect was an important source of information for judgments of use and acceptance. Interest in using a self-driving car was also predicted by lower risk perception, higher benefit perception, and higher levels of trust in the technology. Although people's individual experiences with advanced vehicle technologies and knowledge were associated with perceptions and acceptance, many simply have never been exposed to the technology and know little about it. In the absence of this experience or knowledge, all that is left is the knowledge, experience, and feelings they have related to regular driving.

The affect heuristic and stock ownership: A theoretical perspective

AbstractWe consider asset prices and informational efficiency in a setting where owning stock confers direct utility due to an affect heuristic. Specifically, holding equity in brand name companies or those indulging in “socially desirable” activities (e.g., environmental consciousness) confers positive consumption benefits, whereas investing in “sin stocks” yields the reverse. In contrast to settings based on wealth considerations alone, expected stock prices deviate from expected fundamentals even when assets are in zero net supply. Stocks that yield high direct utility are, on average, more informationally efficient as they stimulate more entry into the market for these stocks and, consequently, more information collection. The analysis also accords with a value effect, high valuations of brand‐name stocks, abnormally positive returns on “sin stocks,” volume premia in the cross‐section of returns, proliferation of mutual funds and ETFs, and yields untested implications. If, as psychological literature suggests, agents derive greater utility from successful companies by “basking in reflected glory,” then asset prices react to public signals non‐linearly, leading to booms and busts, as well as crashes and recoveries.

We choose what we like – Affect as a driver of electricity portfolio choice

Numerous countries are restructuring their electricity systems. Transitioning to electricity systems that are considered acceptable by the public requires that the public's preferences be taken into account. In this study, we investigate the type of energy technology portfolio that people prefer for Switzerland, and why they prefer it, when they are faced with two realistic constraints: (i) the limited domestic potential for the expansion of power plants and (ii) the requirement to not dismantle existing infrastructure. We find that the affect evoked by particular energy technologies is consistently the most important driver of the proportion of those technologies included in an energy portfolio. The regression models for the investigated technologies explain between 14% and 54% of the variance, providing strong support for the affect heuristic. We further find that concerns regarding environmental impacts, costs or climate change play an additional role for portfolio preferences. This is reflected in four different clusters we identified for the German-speaking Swiss population who potentially hold opposing views as to what they consider the best electricity mix. For policymakers, our findings suggest that positive affective reactions towards energy technologies are necessary, although concerns must also be considered if the implementation is to be widely accepted.

Affect Heuristic and Format Effect in Risk Perception

The affect heuristic can evoke a format effect so that different ways of expressing the level of likelihood of an event happening can cause different perceptions of the level of risk. We conducted 3 studies to test the hypothesis that a format effect is not always present at every level of probability, and even when a format effect occurs, it depends on risk level and emotion. In Study 1, the risk of a flood threatening participants' homes (familiar risk) regardless of change in emotion, occurred only at a 5% probability level. In Study 2, when facing an unfamiliar risk (being infected by Chikungunya fever), regardless of change in emotion, a format effect occurred at the level of 5% probability only when emotion was positive. In Study 3, a format effect occurred at a 5% probability level when prior emotion expectation was positive and risk consequences were emphasized. We can conclude that the format effect depends on changes in risk level and emotions.

Preference Reversals in Willingness to Pay and Choice

Abstract A fundamental contribution of consumer behavior research is to help marketing scholars develop an understanding of how people think about and express their preferences. In this article we find that two commonly used preference elicitation procedures, willingness to pay (WTP) and choice, are consistently associated with different expressed preferences. Specifically, choices are associated with a relatively greater preference for hedonic goods, while WTP is associated with a relatively greater preference for utilitarian goods. We find that this is caused, in part, by the greater reliance on deliberation in determining WTP values, while preferences in choices are determined by an affect heuristic. Unlike other choice and WTP preference reversals, we find that this effect is not caused by mechanical determinants such as scale compatibility, as the effect persists with continuous scale measures that rely on affect and with choice-based scale measures that rely on determining valuation.

Elicitation-Based Preference Reversals in Consumer Goods

A fundamental contribution of consumer behavior research is to help marketing scholars develop an understanding of how people think about and express their preferences. In this article we find that two commonly used preference elicitation procedures, willingness to pay (WTP) and choice, are consistently associated with different expressed preferences. Specifically, choices are associated with a relatively greater preference for hedonic goods, while WTP is associated with a relatively greater preference for utilitarian goods. We find that this is caused, in part, by the greater reliance on deliberation in determining WTP values, while preferences in choices are determined by an affect heuristic. Unlike other choice and WTP preference reversals, we find that this effect is not caused by mechanical determinants such as scale compatibility, as the effect persists with continuous scale measures that rely on affect and with choice-based scale measures that rely on determining valuation.

Reducing uncertainty to promote appropriate decisions when facing hazardous phenomena at an active volcano

AbstractThis study investigated a new direction for improving the decision making of populations at risk in the context of uncertain environmental events, such as volcanic hazards. According to the risk as feelings theory and dual process models, situations with certain outcomes do not necessarily require the use of affect heuristics (e.g., experienced feelings, anticipated emotions) as valid information in the decision‐making process. In the case of difficult decisions with moral dilemmas, certainty could even improve decisions. Thus, using an ecological design with various scenarios depicting upcoming volcanic hazards, we examined whether reducing the uncertainty of lethal threat by conveying certainty in an information campaign could influence decision making and promote a better quality of choice (correct application of the recommendations from the competent authorities). We focused specifically on two populations composed of local people living in the vicinity of an active volcano (Tungurahua volcano, Ecuador) and local scientists. We also examined whether a difficult decision involving a moral dilemma (e.g., leaving people behind so as not to jeopardize one's own life) potentiated this effect, compared to a less difficult situation without a dilemma. We demonstrated that, for local people facing a moral dilemma (difficult decision), the reduction of uncertainty of lethal threat involved a better application of the actual recommendations. These outcomes provided perspectives on improving the applications of the recommendations among local populations at risk in the context of a real risk exposure.

Cultural predispositions, specific affective feelings, and benefit–risk perceptions: explicating local policy elites’ perceived utility of high voltage power line installations

Policy controversies concerning the prioritized expansion of the National Energy Grid in the U.S. have drawn our attention to examine the variations of benefit–risk perceptions associated with High Voltage Power Line (HVPL) installation among policy elites, a critical conceptual segment of political actors constituting the U.S. energy policy subsystem. From early psychometric studies to more recent explorations of the emotional aspects of risk appraisal, specifying the role of affective feelings in understanding risk judgment has been a subject of much previous research. This paper seeks to advance such an affect-driven approach in an attempt to account for social psychology-based factors by systemically investigating how specific emotions and personally held intrinsic values and beliefs jointly influence individual-level perceptions of HVPL benefits and risks, relying on recent original survey data containing individual responses from 420 anonymous community leaders and key local policy-makers in the state of Arkansas. Building upon previous research rooted in the dual process model of risk judgment and appraisal tendency framework, a particular emphasis is given to identifying the triadic relationship between culturally biased value predispositions, specific emotional dimensions of affect heuristics, and perceptions pertaining to various aspects of HVPL risks and benefits. Through the implementation of the causal mediation analysis, we found that the effect of cultural value predispositions (i.e. egalitarianism, individualism, hierarchism, and fatalism) on perceived benefits and risks associated with HPVL installation among policy elites is partially mediated by specific affective feelings (i.e. fear, anger, happiness, and excitement) in very distinct ways. We conclude this paper by suggesting that a more robust understanding of the cognitive mechanism of benefit–risk perceptions, particularly those of individuals with more opportunities and resources to shape related policies, promises valuable insight for the development of more effective risk communications and better policy-making practices.

Consumer acceptance of mobile payment across time

PurposeAlthough perceived risk and usefulness have been identified as two major factors that influence consumer acceptance of an innovative mobile payment (m-payment), relatively few researchers have explored the impact of affective factors on perceived risk and usefulness, and the relationship between perceived risk and usefulness. Also, it is unclear whether there is a difference in the acceptance intention among users across different diffusion stages of this innovation. The purpose of this paper is to investigate the role of positive emotion in consumer acceptance of WeChat payment across time.Design/methodology/approachThis study proposed and validated a framework integrating the consumer response system model and the affect heuristic. A total of 484 valid responses were collected through two online surveys at two diffusion stages of WeChat payment technology. The structural equation modeling and multigroup analysis were used to test the hypotheses.FindingsThe results show that users’ acceptance intention is relatively related to perceived risk, perceived usefulness, and positive emotion. Positive emotion has a strong negative impact on perceived risk and a positive impact on perceived usefulness. Also, perceived usefulness strongly decreases users’ perception of risk. Multigroup analyses find that both positive emotion and perceived risk have significant positive and negative impacts on acceptance intention at the stage of market introduction rather than market growth. Rather, the influence of positive usefulness on acceptance intention is significantly higher at the stage of market growth than at market introduction.Originality/valueThis study indicates that exploring the role of positive emotion and the moderating effect of diffusion stages in m-payment acceptance provides a more comprehensive understanding of how to achieve a greater acceptance rate of an innovative m-payment.

Framing susceptibility in a risky choice game is altered by galvanic vestibular stimulation

Recent research provides evidence that galvanic vestibular stimulation (GVS) has a modulating effect on somatosensory perception and spatial cognition. However, other vestibular stimulation techniques have induced changes in affective control and decision making. The aim of this study was to investigate the effect of GVS on framing susceptibility in a risky-choice game. The participants were to decide between a safe and a risky option. The safe option was framed either positively or negatively. During the task, the participants were exposed to either left anodal/right cathodal GVS, right anodal/left cathodal GVS, or sham stimulation (control condition). While left anodal/right cathodal GVS activated more right-hemispheric vestibular brain areas, right anodal/left cathodal GVS resulted in more bilateral activation. We observed increased framing susceptibility during left anodal/right cathodal GVS, but no change in framing susceptibility during right anodal/left cathodal GVS. We propose that GVS results in increased reliance on the affect heuristic by means of activation of cortical and subcortical vestibular-emotional brain structures and that this effect is modulated by the lateralization of the vestibular cortex.

English

This article discusses the decision-making process of Wine Producers Association of Altos Montes, at Serra Gaucha/Rio Grande do Sul/Brazil (APROMONTES) winegrowers and winemakers, in their process of adopting innovations to increase their competitiveness. To do that, we used the Prospect Theory. Data collection was conducted through interviews with 12 wineries, 25 winegrowers of APROMONTES wineries, and, as witnesses, seven winegrowers, members of the Rural Labor Union (STR), from Flores da Cunha, Rio Grande do Sul/Brazil. The results point to the fact that both the wineries and winegrowers support their decisions on heuristics of judgment, and, wine producers use mainly the affect, representative, anchoring and adjustment heuristics, while the wineries used representative and affect heuristics. In this perspective, we identified winegrowers as affective decision whose decisions are based primarily on emotional aspects. On the other hand, the wine makers as copier decision whose decisions are supported primarily by observing the decisions of other wine producers: The practice of overflow. Key words: Decisions, judgment heuristics, wine production sector.

Linkage between India Implied Volatility Index and Stock Index Returns

The present study examines the linkage between the change in implied volatility index and the underlying stock index return in the Indian stock market. The empirical results revealed that the contemporaneous return is the most important factor that determines the changes in the current India implied volatility. Besides, the empirical evidences confirm the negative asymmetry volatility-return relation, supporting the behavioral explanations (the affect and representativeness heuristics) rather than financial leverage hypothesis.

Values, Emotions, and Benefit-Risk Assessment: Explicating Local Policy Elites' Perceived Utility of High Voltage Power Line Installations Proposed in the State of Arkansas

Policy controversies concerning the prioritized expansion of the National Energy Grid in the U.S. have drawn our attention to examine the variations of benefit-risk perceptions associated with High Voltage Power Line (HVPL) installation among policy elites, a critical conceptual segment of political actors constituting the U.S. energy policy subsystem. From early psychometric studies to more recent explorations of the emotional aspects of risk appraisal, specifying the role of affective feelings in understanding risk judgment has been a subject of much previous research. This paper seeks to advance such an affect-driven approach in an attempt to account for social psychology-based factors by systemically investigating how specific emotions and personally held intrinsic values and beliefs jointly influence individual level perceptions of HVPL benefits and risks, relying on recent original survey data containing individual responses from 420 anonymous community leaders and key local policymakers (e.g., mayors, city administrators, and city council and chamber of commerce members) in the state of Arkansas. Building upon previous research rooted in the dual process model of risk judgment and appraisal tendency framework, a particular emphasis is given to identifying the triadic relationship between culturally biased value predispositions, specific emotional dimensions of affect heuristics, and perceptions pertaining to various aspects of HVPL risks and benefits. Through the implementation of the causal mediation analysis, we found that the effect of cultural value predispositions (i.e., egalitarianism, individualism, hierarchism, and fatalism) on perceived benefits and risks associated with HPVL installation among policy elites are partially mediated by specific affective feelings (i.e., fear, anger, happiness, and excitement) in very distinct ways. We conclude this paper by suggesting that a more robust understanding of the cognitive mechanism of benefit-risk perceptions, particularly those of individuals with more opportunities and resources to shape related policies, promises valuable insight for the development of more effective risk communications and better policymaking practices.