Impact of Framing Effect and Financial Behavior: A Reviewof Cognitive Bias in Investment Decisions

Framing is a cognitive bias that causes an individual to behave differently in response to the same information when presented differently. ‎This paper analyzes studies on the impact of the framing effect on investment behavior, and examines the impact of gain and loss framing on ‎decisions, the impact of the framing construct on investment decisions within the context of everyday routine, as well as on decisions made ‎in specialized situations, and the effect of framing on investment decisions, and the scenario of loss aversion. The review synthesizes theoretical and empirical work to show how different ways of presenting identical financial information systematically shape investors’ risk ‎perceptions, portfolio choices, and susceptibility to bias. The findings of the study demonstrate that framing influences decision-making and ‎investment behavior, and observe that people tend to choose riskier options easily if they are framed and communicated profitably and ‎attractively. This effect tells us that people's judgments and decisions are highly prone to the manner in which the options are framed or presented to them. This provides insights for practitioners for framing strategies to influence the choices and behavior of customers and ‎investment decisions. This study will be helpful for investors in selecting the best alternatives, leading to optimal decision-making towards ‎their investment journey‎.