Visual Finance: The Pervasive Effects of Red on Investor Behavior
59 Pages Posted: 27 Jun 2017 Last revised: 14 Mar 2019
Date Written: March 13, 2019
Visual communication of financial information is commonplace and involves numerous facets, such as the use color. However, perception of color influences behavior. Through eight experiments, including a consequential stock trading task, 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. Salience effects do not drive the findings. 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
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