Framing Effects, Selective Information, and Market Behavior: An Experimental Analysis

Abstract

The results of an asset market experiment, in which sixty-four subjects trade two assets on eight markets in a computerized continuous double auction, indicate that objectively irrelevant information influences trading behavior. We find that positively and negatively framed information leads to a particular trading pattern, but leaves trading prices and volume unaffected. The experiment also provided support for the disposition effect. Participants who experience a gain sell their assets more rapidly than participants who experience a loss, and positively framed subjects generally sell their assets later than negatively framed subjects.

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