The Framing of Financial Decisions: A Pilot Study
نویسنده
چکیده
We continually need to make decisions, but it is clear that, in so doing, we do not act in accordance with strict rules of rationality. For example, the effect of framing (i.e. the choice of particular words to present a given set of facts) can influence our choices, which raises some serious questions about our real freedom of choice. An increasing body of literature on framing supports a tendency for people to take more risks when seeking to avoid losses as opposed to securing gains. This is explained by framing and the value function within Tversky & Kahneman's prospect theory. An empirical study was undertaken within a Business School to test the hypothesis that framing influenced subjects' choices in four simple financial decisions (A,B,C,D) as indicated in the previous paragraph. The results, based on a sample of 51 adults, partly supported the hypothesis (cases B and D), but the anticipated outcomes were not found in cases A and C. It is probably a high level of risk aversion, irrespective of framing, on the part of the subjects which explains these unexpected findings since subjects exhibited a clear tendency to favour certainty over risky options.
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