The Influence of Information Framing towards Investors Reaction in Bullish and Bearish Market Condition: an Experiment

Caecilia Wahyu Estining Rahayu


This research aims to test the reaction of the investors when the investors receive a dividend information presented with positive or negative frames at the same market conditions, either bullish or bearish market conditions. In addition, it also test the reactions of investors when they are in the bullish or bearish market conditions, the investors receive a dividend information with the same frame, both positive and negative frames. The investors reaction is indicated by the magnitude of the stock price prediction on the next day with absolute value. Experimental method is used to test the hypotheses in this research by using independent sample t-test. The results showed that there is an information framing effect to the investors when receiving the information with a positive frame in the bullish market conditions and gain domain effects occur to the investors in the bullish market conditions when the investors receive the information with a positive frame. These results are expected to provide a new insight on the different reactions of investors when receiving the same information.


An Experiment; Bullish and Bearish Market; Framing Theory; Investor Reaction; Prospect Theory.

Full Text:



Angelovska, J. 2017. Investors Behaviour in Regard to Company Earnings Announcements during the Recession Period: Evidence from the Macedonian Stock Exchange. Economic Research-Ekonomska Istraivanja. 30 (1): 647-660.

Ardiansari, A & Saputra, A. 2015. Capital Markets Reaction towards 2014 Working Cabinet Announcement (Indonesian Case Study). Jurnal Dinamika Manajemen. 6 (1): 62-72.

Bagella, M., Becchetti, L & Ciciretti, R. 2007. Market vs Analysts Reaction: the Effect of Aggregate and Firm Specific News. Applied Financial Economics. 17 (4): 299-312.

Baker, H. K., Filbeck, G & Ricciardi, V. 2017. How Behavioural Biases Affect Finance Professionals. The European Financial Review. December-January. 25 (9).

Bazerman, M. H. 1984. The Relevance of Kahneman and Tverskys Concept of Framing to Organizational Behavior. Journal of Management. 10 (3): 333-343.

Bhutta, N. T & Shah, S. Z. A. 2014. Investors Reaction to the Implementation of Corporate Governance. Open Journal of Accounting. 3: 3-8.

Boyd, J. H., Hu, J & Jagannathan, R. 2005. The Stock Markets Reaction to Unemployment News: Why Bad News is Usually Good for Stocks. The Journal of Finance. 60 (2): 649-672.

Conrad, J., Cornell, B & Landsman, W. R. 2002. When is Bad News Really Bad News?. The Journal of Finance. 57 (6): 2507-2532.

Diamond, L & Lerch, F. J. 1992. Fading Frames: Data Presentation and Framing Effects. Decision Sciences. 23 (5): 1050-1071.

Docking, D. S & Koch, P. D. 2005. Sensitivity of Investor Reaction to Market Direction and Volatility: Dividend Change Announcements. The Journal of Financial Research. 28 (1): 21- 40.

Fox, S & Dayan, K. 2004. Framing and Risky Choice as Influenced by Comparison of Ones Achievements with Others: the Case of Investment in the Stock Exchange. Journal of Business and Psychology. 18 (3): 301-321.

Glaser, M., Langer, T., Reynders, J & Martin, W. 2007. Framing Effect in Stock Market Forecasts: the Difference between Asking for Prices and Asking for Returns. Final Version. Review of Finance. 11 (2): 325-357.

Gudono & Hartadi, B. 1998. Apakah Teori Prospek Tepat untuk Kasus Indonesia?: Sebuah Replikasi Penelitian Tversky dan Kahneman. Jurnal Riset Akuntansi Indonesia. 1 (1): 29-42.

Hazemira, N. 2010. Market Reaction to Dividend Announcements during Bear and Bull Periods. Thesis. Malaysia: Universiti Utara Malaysia.

Kadiyala, P & Rau, P. R. 2004. Investor Reaction to Corporate Event Announcements: Underreaction or Overreaction?. Journal of Business. 77 (2): 357-386.

Kahneman, D & Tversky, A. 1979. Prospect Theory: an Analysis of Decision under Risk. Econometrica. 47 (2): 263-292.

Kaniel, R., Saar, G & Titman, S. 2008. Individual Investor Trading and Stock Returns. The Journal of Finance. 63 (1): 273-310.

Kirchler, E., Maciejovsky, B & Weber, M. 2005. Framing Effects, Selective Information and Market Behavior: an Experimental Analysis. The Journal of Behavioral Finance. 6 (2): 90-100.

Klein, A & Rosenfeld, J. 1987. The Influence of Market Conditions on Event-Study Residuals. Journal of Financial and Quantitative Analysis. 22 (3): 345-351.

Krishnan, R & Booker, D. M. 2002. Investors Use of Analysts Recommendations. Behavioral Research in Accounting. 14 (1): 129-156.

Kuhberger, A. 1995. The Framing of Decisions: a New Look at Old Problems. Organizational Behavior and Human Decision Processes. 62 (2): 230-240.

Levin, I. P., Gaeth, G. J., Evangelista, F., Albaum, G & Schreibe, J. 2001. How Positive and Negative Frames Inluence the Decisions of Person in the United States and Australia. Asia Pacific Journal of Marketing and Logistics. 13 (2): 64-71.

Levin, I. P., Schneider, S. L & Gaeth, G. J. 1998. All Frames are not Created Equal: a Typology and Critical Analysis of Framing Effects. Organizational Behavior and Human Decision Processes. 76 (2): 149-188.

Li, X. Y & Ling, W. Q. 2015. How Framing Effect Impact on Decision Making on Internet Shopping. Journal of Business and Management. 3: 96-108.

Liu, Y. 2003. An Examination of the Long-run Market Reaction to the Announcement of Dividend Omissions and Reductions. Dissertation. Drexel University.

Oakes, W. 1972. External Validity and the Use of Real People as Subjects. American Psychologist. 27: 959-962.

Otchere, I & Chan, J. 2003. Short-Term Overreaction in the Hong Kong Stock Market: Can a Contrarian Trading Strategy Beat the Market?. The Journal of Behavioral Finance. 4 (3): 157-171.

Panasiak, M & Terry, E. 2013. Framing Effects and Financial Decision Making. Proceedings. Presented at: 8th Annual London Business Research Conference Imperial College, London, UK, 8-9 July, 2013.

Park, T. J. 2017. Behavioral Economics in International Investment Law: Bounded Rationality and the Choice of Reservation List Modality Penn State. Journal of Law & International Affairs. 5 (2).

Pompian, M. M. 2006. Behavioral Finance and Wealth Management. United States of America: John Wiley and Sons, Inc.

Pradiptyo, R., Sasmitasiwi, B., Sahadewo, G. A., Rokhim, R., Ulpah, M & Faradynawati, I. A. A. 2010. Alternatif Struktur OJK yang Optimum: Kajian Akademik. Draft III. Tim Kerjasama Penelitian FEB UGM dan FE UI.

Putri, N. K. 2012. Pengujian Eksperimental atas Pengaruh Format Laporan Risiko dalam Kerangka Teori Probabilistic Mental Model terhadap Keputusan Analis Investasi. Disertasi Yogyakarta: UGM.

Reid, L. C & Carcello, J. V. 2016. Investor Reaction to the Prospect of Mandatory Audit Firm Rotation. The Accounting Review. 92 (1): 183-211.

Sharma, V., Hur, J & Lee, H. 2008. Glamour versus Value: Trading Behavior of Institutions and Individual Investors. The Journal of Financial Research. 31 (1): 65-84.

Shih, F. Y. L. 1992. Dividend Announcements Under Varying Market Conditions: The Case of Specially Designated Dividends. Journal of Economics and Finance. 16 (3): 143-151.

Stark, E., Baldwin, A. S., Hertel, A. W & Rothman, A. J. 2016. Understanding the Framing Effect: Do Affective Responses to Decision Options Mediate the Influence of Frame on Choice?. Journal of Risk Research. 20 (12): 1585-1597.

Suartana, I. W. 2005. Model Framing dan Belief Adjustment dalam Menjelaskan Bias Pengambilan Keputusan Pengauditan. Proceedings. Presented at: SNA VIII, Solo, 15-16 September 2005.

Tandelilin, E. 2001. Beta pada Pasar Bullish dan Bearish: Studi empiris di Bursa Efek Jakarta. Jurnal Ekonomi dan Bisnis Indonesia. 16 (3): 261-272.

Tuyon, J., Ahmad, Z & Matahir, H. 2016. The Roles of Investor Sentiment in Malaysian Stock Market. Asian Academy of Management Journal of Accounting and Finance. 12 (1): 43-75.

Tversky, A & Kahneman, D. 1981. The Framing of Decisions and the Psychology of Choice. Science. 211 (4481): 453-458.

Veronesi, P. 1999. Stock Market Overreaction to Bad News in Good Times: a Rational Expectations Equilibrium Model. The Review of Financial Studies. 12 (5): 975-1007.

Yang, Z. O., Jia Xu, J., Wei, J & Liu, Y. 2017. Information Asymmetry and Investor Reaction to Corporate Crisis: Media Reputation as a Stock Market Signal. Journal of Media Economics. 30 (2): 82-95.

Yudianti, N & Lo, E.W. 2005. Pengaruh Framing, Pertanggungjawaban dan Jenis Kelamin dalam Keputusan Investasi Tambahan: Keputusan Individual dan Grup. Jurnal Akuntansi dan Manajemen STIE YKPN Yogyakarta. 16 (2): 121-128.

View Counter: Abstract - 89 and PDF - 156


  • There are currently no refbacks.