Risk and emotions: An analysis of the effect of risk perception, emotions, and emotional intelligence on protective and investment decisions

We daily assess risks and make decisions about their potential negative consequences. Some of them are simpler, and we face them quickly and intuitively; others are more difficult, and their assessment requires more of our cognitive resources. However, understanding how people assess risks is not easy. While the majority of research focused primarily on determining its objective components, i.e., probabilities and consequences of negative outcomes, and expected people to perform rational calculations; more recent studies showed that when we subjectively perceive risks, we rely primarily on our previous experiences with similar hazards and our emotional and affective reactions. Research showed that people store information, images, and stimuli about risky events tagging them with different positive and negative affective reactions. When assessing risks, people automatically consult the affective tags associated with the stored mental images and use those emotions to guide their understanding of risks (i.e., "affect heuristics"). Research also showed that people's risk perception and emotional reactions could be influenced by how the information regarding the risk is communicated. People's understanding of a risky situation and behaviors towards hazards can be influenced by the type of framing or the numerical format used by messengers (e.g., media). However, media outlets continue to present information about risks underestimating the power of the attributes of messages on emotional reactions, risk perception, and behavioral intentions. A recent notable example is the media communication of the COVID-19 pandemic. At the beginning of the pandemic, every media outlet showed growing numbers of people who died of the disease and presented them through numerical formats difficult to evaluate from a general population, not considering that the communication of those numbers would then influence people's choices to protect or not themselves and others. It is paramount to understand how people react emotionally to new and unfamiliar risks, how media communication can influence their perception, and how their risk perception leads them to actions, especially during a worldwide health emergency. The first two studies presented in this dissertation contribute to the literature that aims to better understand people's perception of the COVID-19 pandemic. Specifically, they investigate how different ways of reporting information in the media can influence citizens' protective behaviors by interfering with their emotional reactions and risk perception. Study 1 tested how presenting positive or negative information (i.e., number of people who recovered versus people who died) about the COVID-19 pandemic and its comparison with the seasonal flu can lead citizens to different emotional and risk appraisals that will, in turn, affect their decision to act preventive measures to reduce their risk of contagion. Study 2 instead looks into more specific details of the risk communication of the pandemic, and it investigates whether different numerical formats used to report mortality rates of COVID-19 can affect citizens' emotional reactions, risk perception, and health-related risky behaviors. Finally, since emotions have such a central role in our perception of risks, it is essential to note that we all experience emotions differently. If we want to have a complete understanding of the way our affective and emotional reactions influence risk perception, we have to consider the subjectivity of our emotional experiences. Research investigated how personality dispositions that inform us on how subjectively we manage and understand our emotions, such as the trait of emotional intelligence, can influence our perception of risks. However, there is still a limited understanding of the importance of these personality traits on risk perception, especially in risk domains characterized by high uncertainty. For example, the financial market represents one of the fields with the highest uncertainty. Decision makers, both professionals, and investors, often have to assess risks and make decisions with little information to rely upon. However, poor decisions in this field can have severe consequences on people's finances and, therefore, their wellbeing. This thesis aims to investigate the role of emotions in risk perception and judgments, also testing the influence of trait emotional intelligence on our understanding of risks. Study 3 investigates the effect of trait emotional intelligence and experience on the misperception of the correlation between risk and returns in professional financial advisors. In the first part of this dissertation, I will introduce the theoretical framework under which the abovementioned studies have been developed; in the second part, I will report the studies, and in the third and final part, I will discuss the findings and discuss the theoretical and practical implications of this thesis.