DEEP Sleep: The Impact of Sleep on Financial Risk Taking
Nofsinger, J., & Shank, C. (2019). DEEP Sleep: The Impact of Sleep on Financial Risk Taking. Review of Financial Economics, 37, 92–105.
31 Pages Posted: 14 Aug 2017 Last revised: 1 Feb 2023
Date Written: April 17, 2018
In this paper, we examine the relationship between sleep and financial risk taking. The results indicate that individuals who have better sleep display less distortion of probability, are less susceptible to the present bias, and have a lower discounting rate. Specifically, individuals with better self-reported sleep quality have less distortion of probability, a more curved utility function, and are less loss averse, while those with fewer sleep disturbances display less probability distortion and have more curvature in their utility function. Overall, the results show that there are cognitive deficits in financial decision making by having poor sleep habits that can have important consequences.
Keywords: Risk Taking, Loss Aversion, Present Bias, Probability Distortion, Sleep
JEL Classification: G02, I10
Suggested Citation: Suggested Citation