Thinking about prices versus thinking about returns in financial markets

Glaser, Markus ; Iliewa, Zwetelina ; Weber, Martin

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Document Type: Article
Year of publication: 2019
The title of a journal, publication series: The Journal of Finance
Volume: 74
Issue number: 6
Page range: 2997-3039
Place of publication: Hoboken, NJ [u.a.]
Publishing house: Wiley
ISSN: 0022-1082 , 1540-6261
Publication language: English
Institution: Business School > ABWL u. Bankbetriebslehre (Seniorprofessur) (Weber 2017-)
Subject: 330 Economics
Classification: JEL: D14 , D18 , G02 , G23,
Keywords (English): expected returns , information presentation , question format , judgmental forecasting , professional forecasters
Abstract: Prices and returns are alternative ways to present information and to elicit expectations in financial markets. But do investors think of prices and returns in the same way? We present three studies with subjects having various levels of expertise, amount of information, and different incentive schemes. The results are consistent across all studies: Asking subjects to forecast returns as opposed to prices results in higher expectations, whereas showing them return charts as opposed to price charts results in lower expectations. Experience is not a useful remedy but cognitive reflection mitigates the impact of format changes.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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