Saving for a rainy day! Bank customers are less open to taking risks with their money when the weather is poorer, researchers say
- Researchers found the weather affects how we choose to invest our cash
- People are less open to taking risks with investments when the weather is bad
As the rain finally stops and the days get warmer, you might start to think differently about your money, a study suggests.
Researchers who analysed the attitudes of more than 60,000 bank customers found the weather affects how we choose to invest our cash.
People were less open to taking risks with their investments when the weather was poorer, the team from the University of Strasbourg and Paris Business School discovered.
‘We find that financial risk tolerance is lower during unpleasant weather, namely in winter and relatively colder temperatures,’ the academics wrote in their research paper.
They explained that while the amount of risk a person can tolerate is often believed to be consistent and enduring, research has begun to challenge this view.
As the rain finally stops and the days get warmer, you might start to think differently about your money, a study suggests (File image)
‘Although risk tolerance is considered as a stable personality trait in psychology, a growing number of studies [have] challenged this view by documenting that risk tolerance, like other attitudes, is a psychological state which can change over time with the influence of environment factors,’ the researchers said.
For the study, which was published in the academic journal Finance Research Letters, the team studied the tolerance towards financial risk of more than 60,803 retail banking clients at a French bank.
The clients had been asked questions during a compulsory risk-profiling questionnaire conducted in person, in the presence of a financial advisor; the data was therefore taken from a real-world banking context.
Risk tolerance was measured by asking the customers to make a trade-off between risk and return. They were asked the question: ‘As a general rule, which assertion best describes you?’ and told to choose from three alternatives: ‘Accepting lower remuneration by taking no risk on the invested capital’ – labelled low risk – ‘seeking better remuneration by taking a capital risk’ – labelled medium risk – and ‘seeking high performance by accepting a significant part of capital risk’ – labelled high risk.
They found that clients who answered the question in the winter had significantly lower risk tolerance than those in other seasons.
People were less open to taking risks with their investments when the weather was poorer, the team from the University of Strasbourg and Paris Business School discovered (File image)
They also found that risk tolerance assessed in the coldest temperatures was significantly lower than in relatively warmer temperatures.
‘Importantly, the influence of weather on risk tolerance is also found in clients who answered the questionnaire twice under different weather conditions,’ they said.
It’s thought that our moods are sensitive to weather, and that our mood then has a knock-on effect on risk tolerance.
‘Psychology research documents that the valence of mood is sensitive to weather conditions: good weather stimulates positive mood [and poorer weather stimulates negative mood],’ the researchers wrote.
‘People are generally more optimistic in their choices and willing to accept risk when in good mood.’ A study in 2020 by the National University of Singapore found that people are willing to spend more on credit cards when the weather is sunny.
And in another 2020 study, researchers at Copenhagen Business School found that when the weather was cloudy, people who were investing in crowdfunding projects were unwilling to part with as much money.
