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Financial Decisions Influenced by Light Intensity

A study of more than 2500 people has provided new evidence about the effects of luminance on the quality and consistency of our financial decision-making.

Luminance is a measurement of the amount of light that falls on the Earth’s surface. It can be affected by cloud cover, humidity, suspended particles, and time of day and year.

Researchers already know that luminance affects behaviour, with sensors in the human retina carrying continuous information about light levels to the hypothalamus, which regulates functions such as hunger, sleep and sex drive.

The study, published in PLoS ONE, investigated how luminance affected participants’ decisions about monetary gambles using touch screens mounted at an exhibition on ageing. In each situation, people could choose a certain payout of $5 ,or a lottery option with the possibility of receiving nothing, or a cash amount between $5 and $125. Behavioural data from the responses received at the exhibition was then merged with luminance measurements from a nearby weather station.

The researchers found that luminance affects decision-making in different ways, with higher and lower levels of light intensity affecting how much risk people can tolerate, how comfortable they are making decisions in ambiguous situations, and how consistent their decisions are over a range of choices.

“On the days with higher light intensity, people made worse decisions and they were more inconsistent in the choices that they made,” said co-author A/Prof Agnieszka Tymula of The University of Sydney.

Luminance also affected people’s risk attitudes, with people more likely to avoid known risks when luminance was high. For example, when offered a choice between a certain $5 payout and a 50% chance of $20, they were more likely to go for the certain $5.

Surprisingly, they had greater tolerance for unknown risks on days of high luminance, when they were more likely to go for an unknown chance of getting $20 over the certain $5 payout.

“Overall, the effects are not of an enormous magnitude, but nevertheless they are consistent, significant, and strong enough to be expected to have significant effects on financial markets,” Tymula said.