Visual Finance: The Pervasive Effects of Red on Investor Behavior

The visual communication of financial information is commonplace and involves numerous facets, including the use of color. At the same time, perception of color influences behavior. Through eight experiments, we show that using red color to represent financial data impacts individuals' risk preferences, expectations of future stock returns, and trading decisions. The effects are not present in colorblind individuals and are muted in China, where red represents prosperity. Other colors, including yellow and blue, do not generate the same effects. Overall, we demonstrate that simple perceptual processes influence complex investor behavior, which is important given society's increasing reliance on visual communication.

Keywords: Color psychology, experimental finance, household finance

JEL Classification: G11, G40, G41

Suggested Citation: Suggested Citation

Bazley, William and Cronqvist, Henrik and Mormann, Milica, Visual Finance: The Pervasive Effects of Red on Investor Behavior (April 20, 2020). Swedish House of Finance Research Paper No. 17-16, SMU Cox School of Business Research Paper No. 18-4, University of Miami Business School Research Paper No. 2992812, Available at SSRN: https://ssrn.com/abstract=2992812 or http://dx.doi.org/10.2139/ssrn.2992812