Framing Effects in the Chinese Stock Market : A Test of New Measurement to Firm-Special Behavioral Characteristic

This paper provides a measurement of framing effects in the stock market by using actual market open trading data, and provide a test of this new firm-special behavioral characteristic. We adopt univariate and bivariate portfolio-level analyses with seminal rational and behavioral factors, to demonstrate that framing effects which we defined is indeed a new firm-special behavioral characteristic. Additionally, we find that there is a strong negative relation between framing effects and one-month-ahead excess returns. Framing effects is stochastic with no persistence feature. Stocks with higher framing effects are more likely to be held by retail investors, and the role of framing effects is more important in the boom macroeconomic conditions than in the recessions. And the investment strategy based on framing effects can achieve an excellent performance