Arbeitspapier

Framing effects on asset markets: An experimental analysis

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.

Language
Englisch

Bibliographic citation
Series: SFB 373 Discussion Paper ; No. 2001,17

Classification
Wirtschaft
Auctions
Design of Experiments: Laboratory, Individual
Asset Pricing; Trading Volume; Bond Interest Rates
Subject
Prospect Theory
Framing
Disposition Effect
Financial Markets
Risk Attitude

Event
Geistige Schöpfung
(who)
Kirchler, Erich
Maciejovsky, Boris
Weber, Martin
Event
Veröffentlichung
(who)
Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes
(where)
Berlin
(when)
2001

Handle
URN
urn:nbn:de:kobv:11-10049324
Last update
10.03.2025, 11:41 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Kirchler, Erich
  • Maciejovsky, Boris
  • Weber, Martin
  • Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes

Time of origin

  • 2001

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