Anthony J. Porcelli and Mauricio R. Delgado of Rutgers University asked participants to immerse their hands in water which was at room temperature (low stress) or ice-cold (high stress). Participants then had to make decisions about financial gambles that were either risky (less likely but with a high payout) or conservative (more likely but with a lower value).

The results were consistent with a phenomenon known as the reflection effect - we tend to show increased conservatism when choosing between two potentially positive outcomes, but increase our risky behavior when choosing between two gambles that result in a loss. However, this study suggests that stress exaggerates this effect; while exposed to stress volunteers were more conservative when choosing between potentially positive outcomes and were riskier when choosing between gambles that could result in a loss

The researchers claim that when we are stressed, we fall back on lower level thought processes instead of thinking deliberately and rationally about the problem. This implies that stressful environments lead to riskier decisionmaking. It may also explain the current banking crisis, perhaps financial decisions should not be made by stressed bankers!