IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/9612.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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.

Suggested Citation

  • Lupia, Arthur & Krupnikov, Yanna & Levine, Adam Seth & Grafstrom, Cassandra & MacMillan, William & McGovern, Erin, 2008. "How “Point Blindness” Dilutes the Value of Stock Market Reports," MPRA Paper 9612, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:9612
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/9612/1/MPRA_paper_9612.pdf
    File Function: original version
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Karen K. Lewis, 1999. "Trying to Explain Home Bias in Equities and Consumption," Journal of Economic Literature, American Economic Association, vol. 37(2), pages 571-608, June.
    2. Bettman, James R & Kakkar, Pradeep, 1977. " Effects of Information Presentation Format on Consumer Information Acquisition Strategies," Journal of Consumer Research, Oxford University Press, vol. 3(4), pages 233-240, March.
    3. Torben Lütje & Lukas Menkhoff, 2007. "What drives home bias? Evidence from fund managers' views," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(1), pages 21-35.
    4. Xavier Gabaix & David Laibson & Guillermo Moloche & Stephen Weinberg, 2006. "Costly Information Acquisition: Experimental Analysis of a Boundedly Rational Model," American Economic Review, American Economic Association, vol. 96(4), pages 1043-1068, September.
    5. Randolph B. Cohen & Christopher Polk & Tuomo Vuolteenaho, 2005. "Money Illusion in the Stock Market: The Modigliani-Cohn Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 639-668.
    6. Levy, Haim & Sarnat, Marshall, 1970. "International Diversification of Investment Portfolios," American Economic Review, American Economic Association, vol. 60(4), pages 668-675, September.
    7. James Poterba & Joshua Rauh & Steven Venti & David Wise, 2007. "Defined Contribution Plans, Defined Benefit Plans, and the Accumulation of Retirement Wealth," NBER Chapters,in: Public Policy and Retirement, Trans-Atlantic Public Economics Seminar (TAPES), pages 2062-2086 National Bureau of Economic Research, Inc.
    8. Jerry Hausman, 2003. "Sources of Bias and Solutions to Bias in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 23-44, Winter.
    9. Rupert Sausgruber & Jean-Robert Tyran, 2005. "Testing the Mill hypothesis of fiscal illusion," Public Choice, Springer, vol. 122(1), pages 39-68, January.
    10. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, Oxford University Press, vol. 69(1), pages 99-118.
    11. Sirkka L. Jarvenpaa, 1989. "The Effect of Task Demands and Graphical Format on Information Processing Strategies," Management Science, INFORMS, vol. 35(3), pages 285-303, March.
    12. Rao, Akshay R & Monroe, Kent B, 1988. " The Moderating Effect of Prior Knowledge on Cue Utilization in Product Evaluations," Journal of Consumer Research, Oxford University Press, vol. 15(2), pages 253-264, September.
    13. Kardes, Frank R. & Kim, John & Lim, Jeen-Su, 1994. "Moderating effects of prior knowledge on the perceived diagnosticity of beliefs derived from implicit versus explicit product claims," Journal of Business Research, Elsevier, vol. 29(3), pages 219-224, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    behavioral economics: personal finance; communication;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:9612. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter) or (Rebekah McClure). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.