Markus Glaser|Thomas Langer|Jens Reynders|Martin Weber
Framing Effects in Stock Market Forecasts: The Difference Between Asking for Prices and Asking for Returns*
University of Mannheim|University of Münster|Siemens (Germany)|University of Mannheim
studies analyzing return expectations financial market participants like fund managers cfos individual investors highly influential academia practice argue show results surveys easily influenced elicitation mode return expectations surveys ask future stock price levels likely produce mean reverting expectations surveys directly ask future returns furthermore conduct questionnaire study explicitly analyzes whether specific elicitation mode affects return expectations direction study subjects asked state mean forecasts seven time series using subject design one half subjects asked state future price levels group directly asked returns observe highly significant framing effect upward sloping time series return forecasts stated investors return forecast mode significantly higher derived investors price forecast mode downward sloping time series return forecasts given investors return forecast mode significantly lower derived investors price forecast mode argue finding consistent behavioral theories investor expectation formation based representativeness heuristic