The Visual Shape Score: On its Predictability in the Lab, the Aggregated Stock Market, and the Cross-Section of Stock Returns

We introduce a simple and highly portable measure capturing the impact of price path visualizations on investor behavior, beliefs, and financial market outcomes: the visual shape score (VSS). The score reflects the degree of convexity of a price path. Although VSS is only a single metric, it captures four aspects of price path visualizations: bottom-up visual salience, top-down effects like evoked emotions, visual pattern recognition, and simplifications due to visualisation. Experimental findings suggest that more convex shapes positively explain investors' return expectations, their stated stock attractiveness, and investments. We augment the experimental results with field data. We find that VSS can help to better understand beliefs elicited from survey data and that VSS exhibits return predictability among individual stocks beyond a large range of cross-sectional return predictors.