(via zoom) Cents and Sensibility: Exploring Non-Proportional Reasoning During Stock Market Declines

This paper studies whether people evaluate a stock’s riskiness based on its price and exhibit non-proportional thinking in a stock market decline. In a survey, I present several scenarios of stock prices at different orders of magnitude that fall by the same percentage but are shown in dollar terms. The results indicate that people's reactions differ depending on the nominal value of the stock: They sold more higher-priced stocks than lower-priced ones. In addition, people who are risk-averse or follow stock-related news exhibited more robust non-proportional reasoning. These findings suggest that individuals rely on nominal value change rather than percentage change when evaluating the riskiness of a stock during a market downturn.