Combining cognition and economics: The effect of visual attention on investment decisions.
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2020-07-15
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en
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This paper analyses the effect of visual attention on perceived risk, expected return, and willingness to invest. Conventionally, standard deviation of returns is seen as the measure for risk. However, more recently other salient features such as highs, lows, and probability of a loss have been shown to influence perceived risk. Apparently, investors are influenced by some visual factors of price paths. This paper studies the channel through which certain factors may influence invest decisions, namely visual attention. The effect of visual attention is tested experimentally by creating two treatments, one with short visual attention (2 seconds) and one with long visual attention (10 seconds). The findings suggest that visual attention can influence perceived risk and expected return considerably. No such effect was found for willingness to invest. This indicates that not only graphical features, but also the visual attention that is associated with them are relevant when making investment decisions.
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Faculteit der Managementwetenschappen