The Effects of Approach/Avoidance Motivation and Gain/Loss-Framing on the Processing of Information Cues by Non-Professional Investors

43 Pages Posted: 11 Sep 2020 Last revised: 15 Dec 2020

See all articles by Stephanie Jana

Stephanie Jana

ESCP Business School Berlin

Tyge Kummer

Griffith University

Martin Schmidt

ESCP Business School Berlin, Department of Financial Reporting & Audit

Date Written: December 14, 2020

Abstract

Investor judgment and decision-making (JDM) is influenced by several factors. We examine the effect of dispositional goal orientation (approach and avoidance motivation), as well as situational goal orientation (gain- and loss-framing), on non-professional investors’ JDM. In an experiment, 150 business students evaluated the relevance of positive and negative information cues and estimated the resulting stock price changes. Results show that approach motivation increases the perceived relevance of positive and negative information cues, which in turn results in greater expected stock price changes. The increasing effect that approach motivation has on the perceived relevance of negative information cues is amplified by gain-framing and dampened by loss-framing. Similarly, the effect that the perceived relevance of positive and negative information cues has on expected stock price changes is amplified under gain-framing and dampened under loss-framing. These results contribute to the JDM literature and have practical implications for non-professional investors.

Keywords: Approach motivation, Avoidance motivation, Gain-framing, Goal orientation, Investors, Judgment and decision-making, Loss-framing, Regulatory focus

JEL Classification: G41, M41

Suggested Citation

Jana, Stephanie and Kummer, Tyge and Schmidt, Martin, The Effects of Approach/Avoidance Motivation and Gain/Loss-Framing on the Processing of Information Cues by Non-Professional Investors (December 14, 2020). Available at SSRN: https://ssrn.com/abstract=3664856 or http://dx.doi.org/10.2139/ssrn.3664856

Stephanie Jana

ESCP Business School Berlin ( email )

Heubnerweg 8-10
Berlin, 14059
Germany

Tyge Kummer

Griffith University ( email )

170 Kessels Road
Nathan, Queensland QLD 4111
Australia

Martin Schmidt (Contact Author)

ESCP Business School Berlin, Department of Financial Reporting & Audit ( email )

Heubnerweg 8-10
Berlin, 14059
Germany

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