Document Type

Union College Only

Department

Economics

Start Date

21-5-2021 10:30 AM

Description

In 2020, the market share of retail investors increased significantly compared to the past 10 years. The increase of inexperienced investors can possibly cause some risk to the financial security of many households in the country. Online trading platforms have become the main form of trading for retail investors. Moreover, news articles and headlines are becoming an integral part of online trading platforms, allowing users to see relevant articles on a particular security when viewing the security information. These articles can affect investors' decisions or prime them to behave in a certain way. Previous studies in economics and psychology show that humans' financial decisions can be affected by priming. The aim of this study is to examine the effect of exposure to positive and negative news articles on individuals' risk preferences. In addition, the study aims to examine if the framing of the news stories has an effect on individuals' behavior. The study will have a 2x2 design. The two independent variables are going to be the sentiment of the news (positive or negative news) and the humanization of the article (whether the story mentions a person's loss or a generic market loss). The positive stories are going to include stories about stock market gains. Conversely, the negative stories are going to include stories about stock market losses. For the humanization variable, the personal stories will include stories about a gain or a loss by a person while generic stories are going to discuss general market underperformance or outperformance. I expect positive news articles to cause participants to be more risk seeking. On the other hand, I expect negative news articles to cause participants to become more risk averse. In addition, I expect the humanized stories to have a significantly different effect compared to the generic stories because of the reliability of humanized stories.

Share

COinS
 
May 21st, 10:30 AM

The Effects of News Priming on Risk Preferences

In 2020, the market share of retail investors increased significantly compared to the past 10 years. The increase of inexperienced investors can possibly cause some risk to the financial security of many households in the country. Online trading platforms have become the main form of trading for retail investors. Moreover, news articles and headlines are becoming an integral part of online trading platforms, allowing users to see relevant articles on a particular security when viewing the security information. These articles can affect investors' decisions or prime them to behave in a certain way. Previous studies in economics and psychology show that humans' financial decisions can be affected by priming. The aim of this study is to examine the effect of exposure to positive and negative news articles on individuals' risk preferences. In addition, the study aims to examine if the framing of the news stories has an effect on individuals' behavior. The study will have a 2x2 design. The two independent variables are going to be the sentiment of the news (positive or negative news) and the humanization of the article (whether the story mentions a person's loss or a generic market loss). The positive stories are going to include stories about stock market gains. Conversely, the negative stories are going to include stories about stock market losses. For the humanization variable, the personal stories will include stories about a gain or a loss by a person while generic stories are going to discuss general market underperformance or outperformance. I expect positive news articles to cause participants to be more risk seeking. On the other hand, I expect negative news articles to cause participants to become more risk averse. In addition, I expect the humanized stories to have a significantly different effect compared to the generic stories because of the reliability of humanized stories.

blog comments powered by Disqus