Investment decisions are very difficult because they involve money and can impact ourquality of life. According to the axioms of rationality, different but equivalent informationformats should not affect investment strategies. The authors perform two experimentshere, and find evidence of a strong absolute magnitude effect on investment decisions.In Experiment 1, participants (students) chose to sell a losing fund more oftenwhen returns were expressed as a percentage of variation between the buying valueand the actual value (e.g., 24%) than when they were expressed as a monetary differencebetween the buying price and the actual price (e.g., $0.24). In the context of theexperiment, the percentage format decreased the disposition effect significantly. Furthermore,describing the stock returns as ratios (e.g., ¼) increased the tendency towardthe status quo bias. In Experiment 2, the authors showed that the absolute magnitudeof the numbers shaped participants’ satisfaction with fund returns, and wasresponsible for the different choices of investment strategies.

Numerical information format and investment decisions: implications for the disposition effect and the status quo bias / Rubaltelli, E.; Rubichi, Sandro; Savadori, L.; Tedeschi, Marcello; Ferretti, Riccardo. - In: JOURNAL OF BEHAVIORAL FINANCE. - ISSN 1542-7560. - STAMPA. - 6:(2005), pp. 19-26.

Numerical information format and investment decisions: implications for the disposition effect and the status quo bias.

RUBICHI, Sandro;TEDESCHI, Marcello;FERRETTI, Riccardo
2005

Abstract

Investment decisions are very difficult because they involve money and can impact ourquality of life. According to the axioms of rationality, different but equivalent informationformats should not affect investment strategies. The authors perform two experimentshere, and find evidence of a strong absolute magnitude effect on investment decisions.In Experiment 1, participants (students) chose to sell a losing fund more oftenwhen returns were expressed as a percentage of variation between the buying valueand the actual value (e.g., 24%) than when they were expressed as a monetary differencebetween the buying price and the actual price (e.g., $0.24). In the context of theexperiment, the percentage format decreased the disposition effect significantly. Furthermore,describing the stock returns as ratios (e.g., ¼) increased the tendency towardthe status quo bias. In Experiment 2, the authors showed that the absolute magnitudeof the numbers shaped participants’ satisfaction with fund returns, and wasresponsible for the different choices of investment strategies.
6
19
26
Numerical information format and investment decisions: implications for the disposition effect and the status quo bias / Rubaltelli, E.; Rubichi, Sandro; Savadori, L.; Tedeschi, Marcello; Ferretti, Riccardo. - In: JOURNAL OF BEHAVIORAL FINANCE. - ISSN 1542-7560. - STAMPA. - 6:(2005), pp. 19-26.
Rubaltelli, E.; Rubichi, Sandro; Savadori, L.; Tedeschi, Marcello; Ferretti, Riccardo
File in questo prodotto:
File Dimensione Formato  
Numerical Information Format and Investment Decisions.pdf

non disponibili

Tipologia: Post-print dell'autore (bozza post referaggio)
Dimensione 105.58 kB
Formato Adobe PDF
105.58 kB Adobe PDF   Visualizza/Apri   Richiedi una copia
Pubblicazioni consigliate

Caricamento pubblicazioni consigliate

Licenza Creative Commons
I metadati presenti in IRIS UNIMORE sono rilasciati con licenza Creative Commons CC0 1.0 Universal, mentre i file delle pubblicazioni sono rilasciati con licenza Attribuzione 4.0 Internazionale (CC BY 4.0), salvo diversa indicazione.
In caso di violazione di copyright, contattare Supporto Iris

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11380/306307
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact