The same yet different: the effects of vividness in a laboratory asset market

34 Pages Posted: 31 Mar 2013 Last revised: 5 Feb 2021

See all articles by Sudeep Ghosh

Sudeep Ghosh

Hong Kong Polytechnic University

Tom Vinaimont

Nazarbayev University - Graduate School of Business

Date Written: February 4, 2021

Abstract

We provide a framework to interpret investor reactions to qualitatively augmented financial data. Information providers use vivid qualifiers to make base-rate information proximate, emotionally engaging and imagery-producing. Vivid treatment patterns influence investor behavior through biases triggered by the activation of attention and focus. In our laboratory asset market, we expose subjects to information derived from two sources: directional content from a system source and constructed content from a social feedback mechanism. Effects of treating the information with vivid attributes are measurable and strong. Individual responses to vivid information indicate more attention and engagement, resulting in more willingness to trade. Such responses transcend the market clearing mechanism to also affect market variables. System-generated high quality information content creates more focus and adjusts prices towards fundamental values. Low quality information content from a social source distracts participants by confirming their prior optimism bias, leading to larger price deviations from fundamental values. Further, when information from the social source is portrayed vividly, it moderates the interaction between information and sentiment resulting in trade flows from pessimists to optimists. Overall, treatments with more vivid displays tend to sustain prices above fundamental values.

Keywords: Vividness, Financial Information, Trading Behavior, Experiment

JEL Classification: C91, C92, G41

Suggested Citation

Ghosh, Sudeep and Vinaimont, Tom, The same yet different: the effects of vividness in a laboratory asset market (February 4, 2021). Available at SSRN: https://ssrn.com/abstract=2240593 or http://dx.doi.org/10.2139/ssrn.2240593

Sudeep Ghosh

Hong Kong Polytechnic University ( email )

Hung Hom, Kowloon
Hong Kong
+852-27667124 (Phone)

Tom Vinaimont (Contact Author)

Nazarbayev University - Graduate School of Business ( email )

Kazakhstan

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