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Framing Effects on Asset Markets - An Experimental Analysis -

  • Kirchler, Erich

    (University of Vienna, Department of Psychology)

  • Maciejovsky, Boris

    (Humboldt-University of Berlin, Department of Economics,)

  • Weber, Martin

    ()

    (Lehrstuhl für ABWL, Finanzwirtschaft, insb. Bankbetriebslehre)

This paper investigates 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.

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Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 01-09.

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Length: 21 pages
Date of creation: 00 0000
Date of revision:
Handle: RePEc:xrs:sfbmaa:01-09
Note: The authors acknowledge financial support by the University of Vienna under the project title
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