"The term frame dependence means that the way people behave depends on the way that their decision problems are framed."
Shefrin (2000)

Framing is a cognitive heuristic in which people tend to reach conclusions based on the 'framework' within which a situation was presented.

[KaTv00] "The rational theory of choice assumes description invariance: equivalent formulations of a choice problem should give rise to the same preference order (Arrow, 1982). Contrary to this assumption, there is much evidence that variations in the framing of options (e.g., in terms of gains or losses) yield systematically different preferences (Tversky and Kahneman, 1986)."

News is interpreted in a way that supports the trend
- Loss aversion
- regret
- mental accounting

investors indeed realize their gains more readily than their losses. And the winning investments investors chose to sell continue to outperform the losers they hold on to in subsequent months.

Framing - with reliance on how information is presented, a judgment is made on the benefit of a choice

"Empirical studies show that decisions deviate from the predictions of expected utility theory and violate their axiomatic foundations. Hence, many generalizations to non-expected utility theory have been developped. But empirically they did not provide an improvement over the standard approach. In this paper random errors are integrated in an expected utility framework. Such errors occur when agents have limited information processing capacities. A performance criterion is provided to measure the expected success of behavioral strategies. A special class of robust decision rules and its properties are analyzed. It is argued that in case of bounded rationality the evolution will select heuristics from an open class of decision rules due to performance differences."

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