Stock graphs are everywhere, available on financial and public websites to be loaded and customized by users. Authors Priya Raghubir (New York University) and Sanjiv R. Das (Santa Clara University) found that investors believe that stocks with shorter up-and-down movements are less risky than those with longer run-length. This is called the "run-length" effect.
They tested three groups—affluent Californians, undergraduates, and general investors—and found that all three judged a stock with a shorter run-length more favorably. They found that the run-length effect increases with greater education and frequency, length, and diversity of trading experience.
They conclude that because of the large amount of data presented on a graph, investors simplify their task by sampling points from a financial instrument's price history to estimate trend and noise. The sampling strategy leads to perceptual biases when the sample points are not representative of the price series.
The authors believe there are public policy implications that might lead to how data is presented because "systematic biases in risk perceptions may permeate the market uniformly, resulting in persistent biases in prices. . . From a consumer perspective, individual investors should be made aware of their biases in appraising and comparing stocks using charts."
"These results have implications for how financial information is communicated to investors," the authors write. The visual display of stock information has increased and the number of commercial purveyors of stock analysis information has mushroomed…From a public policy perspective, regulators should consider imposing guidelines about how financial information is presented to individuals, akin to mandatory labeling by the Food and Drug Administration (FDA).
Priya Raghubir and Sanjiv R. Das. " The Long and Short of It: Why Are Stocks with Shorter Runs Preferred?" Journal of Consumer Research: April 2010 (published online September 17, 2009).
Mary-Ann Twist | EurekAlert!
Diagnoses: When Are Several Opinions Better Than One?
19.07.2016 | Max-Planck-Institut für Bildungsforschung
High in calories and low in nutrients when adolescents share pictures of food online
07.04.2016 | University of Gothenburg
Researchers from the Institute for Quantum Computing (IQC) at the University of Waterloo led the development of a new extensible wiring technique capable of controlling superconducting quantum bits, representing a significant step towards to the realization of a scalable quantum computer.
"The quantum socket is a wiring method that uses three-dimensional wires based on spring-loaded pins to address individual qubits," said Jeremy Béjanin, a PhD...
In a paper in Scientific Reports, a research team at Worcester Polytechnic Institute describes a novel light-activated phenomenon that could become the basis for applications as diverse as microscopic robotic grippers and more efficient solar cells.
A research team at Worcester Polytechnic Institute (WPI) has developed a revolutionary, light-activated semiconductor nanocomposite material that can be used...
By forcefully embedding two silicon atoms in a diamond matrix, Sandia researchers have demonstrated for the first time on a single chip all the components needed to create a quantum bridge to link quantum computers together.
"People have already built small quantum computers," says Sandia researcher Ryan Camacho. "Maybe the first useful one won't be a single giant quantum computer...
COMPAMED has become the leading international marketplace for suppliers of medical manufacturing. The trade fair, which takes place every November and is co-located to MEDICA in Dusseldorf, has been steadily growing over the past years and shows that medical technology remains a rapidly growing market.
In 2016, the joint pavilion by the IVAM Microtechnology Network, the Product Market “High-tech for Medical Devices”, will be located in Hall 8a again and will...
'Ferroelectric' materials can switch between different states of electrical polarization in response to an external electric field. This flexibility means they show promise for many applications, for example in electronic devices and computer memory. Current ferroelectric materials are highly valued for their thermal and chemical stability and rapid electro-mechanical responses, but creating a material that is scalable down to the tiny sizes needed for technologies like silicon-based semiconductors (Si-based CMOS) has proven challenging.
Now, Hiroshi Funakubo and co-workers at the Tokyo Institute of Technology, in collaboration with researchers across Japan, have conducted experiments to...
14.10.2016 | Event News
14.10.2016 | Event News
12.10.2016 | Event News
21.10.2016 | Health and Medicine
21.10.2016 | Information Technology
21.10.2016 | Materials Sciences