Health Habits and Behavioral Biases

Abstract

We examine the relationship between body mass index (BMI), health habits, and financial risk and time preferences. Using a sample of 128 undergraduate business students, we find that participants with higher BMI exhibit greater utility function curvature, greater loss aversion, and greater inability to delay gratification. Additionally, we find that higher fruit consumption and exercise are negatively related to loss aversion; whereas increased vegetable consumption is negatively related to giving stronger weights to payoffs that are closer to the present time (i.e. the present bias). Overall, our results demonstrate that individuals who engage in healthy habits, just as lower BMI, better diet, and exercise more, have a greater tendency to display rational financial decision-making compared to those who do not. These results have important broader implications for the current national and international discussions regarding the societal impact of rising levels of obesity and poor health habits throughout the world.

Keywords: Financial Decision Making, Loss Aversion, Present Bias, BMI, Health Habits

JEL Classification: G02, I10