SFB 504 discussion paper 01-09

Erich Kirchler
University of Vienna, Department of Psychology
Universitätsstr. 7, A-1010 Vienna

Boris Maciejovsky
Humboldt-University of Berlin, Department of Economics,
Spandauer Str. 1, D-10178 Berlin

Martin Weber
Lehrstuhl für ABWL, Finanzwirtschaft, insb. Bankbetriebslehre
L 5, 2, D-68131 Mannheim

Framing Effects on Asset Markets - An Experimental Analysis -

This paper investigates four hypotheses which are inconsistent with expected utility theory, but may well be explained by prospect theory. It deals with framing, the non-linearity of subjective probabilities, the disposition effect, and the correspondence of different experimental risk elicitation methods. Overall, 64 participants traded two assets on eight markets in a computerized continuous double auction. The results (i) indicate that the framing of information influenced individual trading behavior and asset holdings. However (ii), the variation of the probability of the framed information had no influence on trading volume. In addition, the results (iii) confirm the disposition effect. Participants who experienced a gain sold their assets more rapidly than participants who experienced a loss. In line with previous empirical results, we (iv) found little correspondence between different experimental risk elicitation methods.
B4 Weber
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