Self-esteem and financial risk-taking

Three studies (N-1 = 802, N-2 = 402, N-3 = 349) investigated how self-esteem (general and temporarily changed) is linked to propensity to invest and take financial risks in the domains of investment and gambling. Study 1 (correlational) focused on the relationship between general self-esteem and the propensity to take financial risks. Study 2 (experimental) investigated whether temporarily lowering or raising a person's self-esteem by inducing memories of situations where people were proud of themselves (raised self-esteem) or not proud of themselves (lowered self-esteem) has an impact on subsequent risky financial decision-making. Study 3 (experimental) focused on the interplay between general self-esteem and temporarily changed self-esteem in this context. Results indicated that people with high self-esteem, both as a general trait and when temporarily changed, had a higher propensity to invest and to take investment and gambling risks. Also, Study 3 revealed an interplay between general and temporarily changed self-esteem in influencing the propensities to invest and make risky financial choices, a positive relationship occurring between general self-esteem and propensity to take financial risks when decision makers' self-esteem was temporarily raised but not when it was temporarily lowered.