Framing effects on asset markets: An experimental analysis

Erich Kirchler, Boris Maciejovsky and Martin Weber

No 2001,17, SFB 373 Discussion Papers from Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes

Abstract: In this paper we investigate four hypotheses which are inconsistent with expected utility theory, but may well be explained by prospect theory. It deals with framing, the non-linearity of subjective probabilities, the disposition effect, and the correspondence of different experimental risk elicitation methods. Overall, 64 participants traded two assets on eight markets in a computerized continuous double auction. The results (i) indicate that the framing of information influenced individual trading behavior and asset holdings. However (ii), the variation of the probability of the framed information had no influence on trading volume. In addition, the results (iii) confirm the disposition effect. Participants who experienced a gain sold their assets more rapidly than participants who experienced a loss. In line with previous empirical results, we (iv) found little correspondence between different experimental risk elicitation methods.

Keywords: Prospect Theory; Framing; Disposition Effect; Financial Markets; Risk Attitude (search for similar items in EconPapers)
JEL-codes: C91 D44 G12 (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb373:200117

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