Friend or Foe: The Influence of Ambient Sound on Risk Perception

Abstract

Research in the field of multisensory perception shows that what we hear can influence what we see in a wide range of perceptual tasks. We hypothesize that this extends to the visual perception of risk and conducted three laboratory studies to test our hypothesis, using judgments of financial asset risk (“volatility”) as a testbed. We provide evidence that the presence of ambient sound impacts risk perception and that part of this impact comes from a general association between auditory volume and visual instability. We discuss the implications of our findings for varying domains of decision-making under uncertainty (e.g., financial, medical, and military decision-making), and raise new questions for future research.

Keywords: Neuroeconomics, Applied Psychology, Risk perception, Decision-making under uncertainty

JEL Classification: D87, D91, G41