Countercyclical risk aversion can explain major puzzles such as the high volatility of asset prices. Evidence for its existence is, however, scarce because of the host of factors that simultaneously change during financial cycles. We circumvent these problems by priming financial professionals with either a boom or a bust scenario. Subjects primed with a financial bust were substantially more fearful and risk averse than those primed with a boom, suggesting that fear may play an important role in countercyclical risk aversion. The mechanism described here is relevant for theory and may explain self-reinforcing processes that amplify market dynamics.

The article discusses and analyzes data from several economic experiments in a household survey with mothers of preschool children. The researchers measured competitiveness by giving the subjects the choice between competing in a tournament or receiving a piece rate for a real effort task. The subjects also participated in lottery choices, which enabled the researchers to assess their risk preferences. The relationship between social preferences and competitiveness in the sample of mothers of preschool children was analyzed. The hypothesis that egalitarian subjects aren't as likely to self-select into competitive environments, which can produce winners and losers, was tested. A negative relationship between egalitarian choices and self-selection into competition was found.