Tell me which floor your office is on and I’ll tell you how risky your investment proposal is! While we might prefer otherwise, we all know that investment and legal decisions aren't always completely objective, especially because they are linked to the personalities of the actors involved. And a new and unexpected factor has just been unveiled in a study published in the Journal of Consumer Psychology: the altitude at which we make a financial decision. Let’s see the full details.

The research team led by Sina Esteky, an assistant professor of marketing at Miami University’s business school, first looked at data from more than 3,000 hedge funds from 2013 (500 billion dollars in assets). The scientist studied the correlation between fund volatility (price fluctuation over time) and the elevation of the firm’s offices (from the first to 96th floor of a building). While slight, the researchers were able to establish a significant correlation between an increase in floor number (office elevation) and fund volatility. In order to further consolidate their results, the team carried out a series of experiments.

In the first, 116 participants (30 women, 83 men) were recruited while waiting to get on or off an elevator. This elevator, located in a 73-storey building in a major business district in the midwestern United States, was made of glass and offered a panoramic view of the city and river. During the elevator trips, the experimenter asked the participants to choose between a conservative lottery (a 50/50 chance of winning 50 or 100 dollars) and a riskier one (a 50/50 chance of winning 20 or 130 dollars). S. Esteky and his colleagues noticed that the participants who were going up to the 72nd floor were more likely to choose the second option, while those who were descending tended to choose the first.

In a second experiment, 38 subjects (23 women, 15 men) from the previous experiment returned to the panoramic elevator. In mid-trajectory, the experimenter asked them to imagine, given a certain sum, what amount they would invest, knowing that they had 2 in 3 chances of losing it and 1 in 3 chances of winning 2.5 times the amount invested. Again, the participants took more or less risk depending on whether the elevator was going up or down.

In the third experiment, 144 people (63 women, 81 men) met an experimenter on the ground or third floor of a university building. At a designated place, s/he asked them to make 10 decisions with different levels of risk and profitability. Again, the researchers noted that the subjects located on the third floor were more likely to choose riskier options than their ground floor counterparts. In order to better understand these behaviors, and measure the participants’ emotional state, each person was asked to complete a series of fill-in-the-blanks. For example, “b_s_” could be "boss” or “base” and the word “kin_” could be “king” or “kind." In this completion exercise, the people on the third floor chose more power-related terms (“boss” and “king”) than those on the ground floor. The researchers concluded that these power-related thoughts may explain the effects of altitude on risk-taking.

According to S. Esteky: “When you increase elevation, there is a subconscious effect on the sense of power. This heighted feeling of power results in more risk-seeking behavior.” It should be noted that when participants were informed of the influence of elevation on their decision-making, the altitude impact disappeared; this was also true when people couldn’t tell how high they were (in a windowless room for example). S. Esteky explains that: “The brain is very susceptive to subtle situational factors, but also really good at correcting for such effects, so awareness can help us be more rational in our decisions.”

While we’re waiting to learn more, better stick to playing poker in the basement!