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How “Point Blindness” Dilutes the Value of Stock Market Reports

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  • Lupia, Arthur
  • Krupnikov, Yanna
  • Levine, Adam Seth
  • Grafstrom, Cassandra
  • MacMillan, William
  • McGovern, Erin

Abstract

The stock index “point” is a focal component of financial news reports. While much attention is paid to changes in stock index point totals, few people realize that the value of a stock index “point” varies (and has recently declined). We call this perceptual phenomenon “point blindness” and explain its threat to investors. Simple changes in media presentations of stock index information can counter point blindness. These changes are easy to implement and can help audiences make better financial decisions. An experiment on over 2000 participants shows such changes significantly altering their perceptions of the stock market.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9604.

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Date of creation: 15 Jul 2008
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Handle: RePEc:pra:mprapa:9604

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Keywords: personal finance; money illusion; behavioral finance; behavioral economics; communication; currencies;

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