Are Investors Rational? Evidence on the Impact of Industrial Framing Reclassification on Stock Market Reaction

This study utilizes the overall reclassification of industries policy to explore the postannouncement performance from a behavioral finance perspective. The presentation framing of the biotechnology and medical care industry is one with certainty prospects. This suggests that investors tend to buy more of these stocks because the government emphasizes the importance of this industry since 2002, which induces a significantly positive price effect. However, the reclassified eight electronic-related industries reveal presentation framings with uncertainty prospects. The heterogeneity of the high-technology industry thus leaves investors less tendency to hold these stocks and in turn a negative price effect. This paper shows some evidence and implication, suggesting a link between the presentation framing of industries and investors' behavior.