Abstract
This research aims to test the reaction of the investors when the investors receive a dividend information presented with positive or negative frames at the same market conditions, either bullish or bearish market conditions. In addition, it also test the reactions of investors when they are in the bullish or bearish market conditions, the investors receive a dividend information with the same frame, both positive and negative frames. The investors reaction is indicated by the magnitude of the stock price prediction on the next day with absolute value. Experimental method is used to test the hypotheses in this research by using independent sample t-test. The results showed that there is an information framing effect to the investors when receiving the information with a positive frame in the bullish market conditions and gain domain effects occur to the investors in the bullish market conditions when the investors receive the information with a positive frame. These results are expected to provide a new insight on the different reactions of investors when receiving the same information.
Highlights
Framing effects is a phenomenon that describes the presentation of the same information in different formats can affect individual’s decision (Tversky & Kahneman, 1981; Plous, 1993; Pompian, 2006; Panasiak & Terry, 2013; Stark et al, 2016; Baker et al, 2017)
The first finding proves that the reaction of the participants in this research is greater if they are given a positive frame compared to the participant’s reaction if they are given a negative frame during bullish market condition
This suggests that there are reaction differences between participants due to the frame differences and this is in accordance with the framing theory
Summary
Framing effects is a phenomenon that describes the presentation of the same information in different formats can affect individual’s decision (Tversky & Kahneman, 1981; Plous, 1993; Pompian, 2006; Panasiak & Terry, 2013; Stark et al, 2016; Baker et al, 2017). In the context of investment management, framing is a different way of presenting the same information about company-specific information by corporate issuers, which results in the different perception of the investors and lead to different investors reaction. Various researches about the market reaction (investors) to the company-specific information up to now suggest inconsistent results. There are allegations that the difference of the market reaction is not due to the economic aspects, but to some psychological aspects, such as overreaction/ underreaction, overconfidence, loss aversion and framing bias (Tuyon et al, 2016)
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