The Area as a Visual Heuristic: How Does the Highlighted Area Under the Stock Price Curve Impact Retail Investor Behavior: An Abstract

Tolun Z. E.

Academy of Marketing Science , Louisiana, Amerika Birleşik Devletleri, 17 - 19 Mayıs 2023, ss.28, (Özet Bildiri)

  • Yayın Türü: Bildiri / Özet Bildiri
  • Basıldığı Şehir: Louisiana
  • Basıldığı Ülke: Amerika Birleşik Devletleri
  • Sayfa Sayıları: ss.28
  • Orta Doğu Teknik Üniversitesi Adresli: Hayır

Özet

Financial decisions play a crucial role in consumer welfare and consumers’ prospective economic behavior, including complex educational choices, investment decisions, saving goals, and homeownership choices (Greenberg & Hershfield, 2018). Our focus is to understand the investment decisions of retail investors in the stock market context. Besides the innate complexity embedded in those financial decisions, the explicit or externally available visual stock price information plays an essential role in impacting retail investors’ decision-making processes, as per the results of our findings. The irrationality in choices and decisions that has been continuously acknowledged in behavioral finance literature should bring up the necessity to consider other psychological factors which influence investor decision-making processes (Barberis & Thaler, 2003; De Bondt, 1998; Slovic, 1972; Thaler, 1980; Tversky & Kahneman, 1979). The highlighted area under the price curve compared to the unhighlighted area normally should act as an irrelevant factor in stock price volatility and risk perception. Raghubir and Das (2010) investigated the risk judgments by using visual cues, which is the first paper adding to the literature on biases in judgments due to the utilization of graphical information in the context of financial decision-making, and they found that higher run lengths in the stock price movements are perceived to be riskier. We further investigate the role of irrelevant psychological factors, which might be called “out of the blue” factors by the defendants of classical economics, on stock price volatility perception. The visual preference heuristic has been suggested due to images' fast, less deliberate gestalt processing and easy-to-process nature (Townsend & Kahn, 2014). The advantages coming from the processing speed of images over textual information have been repeatedly shown in psychology and marketing literatures (Clark & Paivio, 1991; Paivio, 1971, 1986; Stenberg et al., 1998; Unnava & Burnkrant, 1991). We specifically focus on comparing absolute stock price graphs, with and without the highlighted area, as a visual representation of financial information instead of using tables or bar charts. According to our findings, the highlighted area under the curve impacts the perception of volatility through differences in perceived steadiness between graphs. Therefore, we propose the perception of steadiness as a potential factor causing distortion in volatility perception.