14 DAY TRIAL // Investigators from the University of Toronto and the University of Waterloo, both in Canada, say that people who suffer from seasonal affective disorder (SAD) are more likely to avoid taking risks during autumn and winter. The intensity of their behavior is controlled by their depression symptoms.
Details of the new investigation appear in the latest issue of the journal Social Psychological and Personality Science, a Sage publication. Researchers were able to establish that the amount of daylight present during the cold seasons has a direct influence of SAD people's financial behaviors.
Interestingly, the team could discover no difference in financial risk-taking between SAD and non-SAD individuals during spring and summer. This further certifies the link between seasonal depression and an unwillingness to spend or invest money as usual.
One of the study authors was Lisat A. Kramer, from the UT Joseph L. Rotman School of Management. In her past studies, she discovered that seasonal affective disorder may very well have the ability to move or stop financial markets during winters and autumns.
Therefore, she decided to study the issue in more detail, alongside colleague J. Mark Weber, from the Waterloo School of Environment, Enterprise, and Development. Their work was published in the July 18 online issue of the journal.
“We’ve never, until now, been able to tie a pervasive market-wide seasonal phenomenon to individual investors’ emotions,” Kramer explains. She is a professor of behavioral finance at the university, PsychCentral reports.
According to official statistics, an estimated 10 percent of the general population suffers from SAD, or other forms of depression. This suggests that the effects these individuals have on financial markets is fairly noticeable, except researchers did not know what to look for until now.
At the same time, not all SAD sufferers have been diagnosed, and some people display some symptoms, without meeting the required milestone to be diagnosed as such. What this means is that many more SAD sufferers may be out there than the 10 percent experts established thus far.
“So much common wisdom about economics and finance is built on the notion that we’re very rational about making financial decisions. But increasingly we’re discovering financial decision-making is an inherently emotional process,” Kramer explains.
“It’s important to take a deep breath and make sure that decisions are being made on the basis of objective criteria, rather than emotional criteria,” the investigator concludes.