Framing Effects on Selected Information and Market Behavior - an Experimental Analysis

Abstract:     
The results of an asset market experiment, in which 64 subjects trade two assets on eight markets in a computerized continuous double auction, indicate that (i) objectively irrelevant information influences trading behavior. Moreover, positively and negatively framed information leads to a particular trading pattern. However (ii), a probability variation of the framed information has no influence on trading volume. In addition, the results (iii) confirm the disposition effect. Participants who experience a gain sell their assets more rapidly than participants who experience a loss, and positively framed subjects generally sell their assets later than negatively framed subjects.

Keywords: Financial markets, Prospect theory, Anchoring and adjustment, Experimental economics, Disposition effect

JEL Classifications: C90, D44, D80, G12

Accepted Paper Series