Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
8942207 | Journal of Economic Behavior & Organization | 2018 | 27 Pages |
Abstract
Price paths are often the only graphical representation of financial products investors receive before making an investment decision. We argue that price paths serve as ”graphical” frames that influence the perceived attractiveness of an asset by highlighting specific asset characteristics. In a controlled lab experiment we find that price paths have an impact on investment decisions. In a regression we test a simple model relating the perception of price path shapes to several heuristics. These heuristics are: focusing on more recent outcomes, deriving implicit reference prices from focal prices, focusing on losses, and estimating risk from the amplitude of the path. We conclude that investment decisions are systematically biased due to the shape of an asset's price path.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Sven Nolte, Judith C. Schneider,