Have you ever noticed that you’re more likely to take chances or make impulsive decisions when you’re feeling stressed? New research reveals that stress actually changes the way our brains weigh risks and rewards, making us more likely to choose riskier options, even when it might not be in our best interest.
A recent study from the University of Arkansas explored this phenomenon by examining how people make financial decisions under stress. The researchers found that the biggest reason for this shift is a decrease in “loss aversion”, our natural tendency to avoid losses more strongly than we seek gains. For example, most people feel the pain of losing $100 more intensely than the joy of winning the same amount. But under stress, this loss aversion drops, making risky choices seem less daunting.
To test this, the team put 147 participants through stressful situations and then asked them to make hypothetical financial choices. Their decisions were analyzed using cumulative prospect theory, a model that explains how people evaluate potential gains and losses. This theory includes four key factors:
– Loss aversion: How much we dislike losing compared to winning.
– Risk aversion: How much we avoid uncertainty.
– Randomness in choices: How unpredictable our decisions are.
– Probability distortion: Our tendency to overestimate rare outcomes (like winning the lottery) and underestimate common ones.
The study also found differences between men and women. Stress had a greater impact on men’s decision-making, making them more likely to take risks. Women, on the other hand, were better at predicting the outcome of a decision under stress, while men had a better sense of the consequences of their choices.
Why would evolution shape us this way? The researchers speculate that in dangerous situations, like being chased by a predator, taking a risk might have been better than doing nothing. In today’s world, however, this stress-driven risk-taking can lead to poor decisions, especially with money or other important matters.
Understanding how stress affects our choices can help us pause and reconsider when we’re under pressure. As study author Grant Shields puts it: “If I’m stressed, I’ll wait to make a decision that could have potential loss implications.” So next time you’re feeling overwhelmed, it might be wise to take a deep breath before making that big decision.
