Framing Effects and Information Processing of Individual Investors

The framing of financial products can strongly influence information processing and thus risk-taking behavior of individual investors. For example, investment portfolios can be presented in aggregated or segregated framing, meaning that they can display either the overall distribution or the single investments of the investment portfolio itself. Two experimental studies demonstrate that correlation and variance of investment portfolios as well as the type of information processing have great influence on the preferred framing. If the variance of the portfolio is extremely high, the aggregated presentation mode is no longer significantly preferred. Framing effects are also mainly observed for individuals who decide intuitively rather than analytically.

Citation:

Martina Steul (2005) ,"Framing Effects and Information Processing of Individual Investors", in E - European Advances in Consumer Research Volume 7, eds. Karin M. Ekstrom and Helene Brembeck, Goteborg, Sweden : Association for Consumer Research, Pages: 47-48.