Being Present: The Influence of Mindfulness on Financial Decisions

Abstract

Mindfulness, the meditative process of non-judgmentally focusing on the present, has gained popularity as an accessible and efficacious cognitive behavioral therapy. We experimentally examine whether state mindfulness affects individuals' preferences and financial choices. By shifting attentional focus to the present, mindfulness increases individuals' subjective discount rates. Consequently, state mindfulness causes people to invest less and realize more of their stock gains, which reduces trading performance. Evidence from field data reinforces the experimental findings. Our results highlight that health initiatives can have direct effects on financial decision-making, which is likely to be increasingly relevant as individuals continue to adopt self-help therapeutics.

Keywords: Digital health therapeutics, disposition effect, household finance, time preferences

JEL Classification: G11, G40, G41, G50