Definition
Identical data can trigger opposite choices purely because of how it is worded or staged.
Example
A trader prefers a position described as having an "80% chance of success" but rejects an identical position framed as having a "20% chance of failure." The underlying distribution is unchanged; the presentation dictates the response.
Cognitive Driver
The mind reacts more strongly to losses than to equivalent gains. When information is framed in positive terms, it encourages risk-taking; when framed negatively, it encourages avoidance. The framing becomes the decision driver, not the underlying probabilities.
Market Expression
Risk reports presented in volatility terms trigger different reactions than those shown in drawdown language. Strategies framed as "income generation" attract more capital than identical strategies framed as "carry with downside tails." Decisions diverge purely due to wording.
Trigger Conditions
- Risk summaries emphasizing either upside or downside
- Performance attribution highlighting gains vs drawdowns
- Marketing language around strategies
- Analyst notes using emotionally charged phrasing
- Ambiguous data or uncertain environments where framing substitutes for clarity
Diagnostic Markers
- Strong preference shifts when equivalent options are reframed
- Increased comfort with positions described in gain language
- Discomfort with identical trades framed in loss language
- Inconsistent risk appetite across differently expressed metrics
- Decision notes referencing emotional reactions to wording rather than data
Cost Profile
- Misallocation toward strategies marketed with positive phrasing
- Avoidance of valid opportunities framed conservatively
- Variable risk-taking depending on presentation style
- Inconsistent portfolio construction despite stable fundamentals
- Susceptibility to persuasive narratives rather than objective analysis
Differentiation From Adjacent Biases
- Not loss aversion: loss aversion responds to pain; framing changes perception before pain occurs.
- Not availability bias: framing is about presentation, not salience.
- Not confirmation bias: framing shapes interpretation; confirmation shapes evidence selection.
Corrective Lens
Re-express all key metrics in symmetric gain and loss language. Compare trades using both positive and negative frames to identify preference drift. Use neutral wording in reviews to prevent emotional responses to phrasing from dominating probability-based decisions.