Feeling left out can lead to risky financial decisions

People who feel isolated are more likely to make risky financial decisions for bigger payoffs, according to a new research.
Rod Duclos, assistant professor of marketing at the Hong Kong University of Science and Technology, and his team conducted several experiments and a field survey and found the more often people felt excluded, the more they chose the longer odds for bigger lottery payoffs, took greater risks with their finances, bet on horse races and gambled in casinos.
"In the absence of social support, forlorn consumers apparently place more value on the power of money to secure what they want socially," he said.

In one experiment, 59 students played an online ball-tossing game designed to make them feel socially included or excluded.
In a separate setting, they chose between two hypothetical gambles with very different odds, Duclos said.
The socially excluded participants favoured the riskier option more strongly than their included counterparts.

A second experiment used essay writing to make 168 students feel either excluded or included and found that the socially excluded participants were twice as likely to gamble as the students who felt included, he said.
Another experiment with 35 students ruled out lower self-esteem as a trigger for risk-taking, through essay writing and a choice of lotteries.

In a fourth experiment with 128 students, researchers found those who felt isolated did not take more risks than others if they were told that having more money would no longer result in social benefits.
For a real-world demonstration, a team of trained research assistants interviewed individuals at malls, parks and subway stations, Duclos said.
They asked participants to choose between two lotteries, one that offered an 80 per cent chance to win USD 200 and a 20 per cent chance to win nothing and another that offered a 20 per cent chance to win USD 800 and an 80 per cent chance to win nothing.

The research assistants then asked participants what proportion of their disposable income they had in low versus high-risk investments, how often they bet on horse racing, how often they gambled in casinos, and how often on a scale of 1-4 they felt socially excluded.
There were clear positive relationships between the degree to which participants felt socially excluded and how much risk they took, Duclos said.
The study was presented at the American Psychological Association's 121st Annual Convention in Honolulu, Hawaii.