How does vivid language shape investor judgments?

Deskripsi

Vivid language, defined as emotionally engaging, image-provoking, and context-rich communication, was found to significantly influence investors, particularly those holding contrarian positions. In bull markets, vividly framed positive news caused short-position investors to raise their earnings forecasts, while in bear markets, vividly framed negative news led long-position investors to lower their forecasts. This interaction highlights how vivid language can exacerbate market trends—intensifying bubbles during bull markets and accelerating panics during downturns. The findings challenge conventional assumptions in accounting and finance, where sterile, numerical communication dominates, by demonstrating the persuasive power of language in shaping investor sentiment. The study underscores the need for investors, especially contrarians, to be mindful of language effects and calls for greater scrutiny of tone in financial reporting. Theoretical contributions include bridging psychology and finance, while practical implications suggest that vivid language may inadvertently sway investment decisions, potentially leading to regrettable outcomes.