Determinants of Investors’ Information Search: Credibility and Confirmation

Jane M. Thayer

University of Virginia

February 3, 2010

Investors have strong economic incentives to engage in unbiased information search in order to maximize the expected value of their investments. I examine whether an investor’s psychological preference for information that supports his past investment decisions dominates his economic incentive to engage in unbiased information search. Results of a web-based experiment indicate that individuals who initially receive information that is unfavorable, or “preference-inconsistent,” regarding a chosen investment position conduct a biased search for additional information that supports their prior investment decision. Moreover, these investors tend to view lower-credibility, preference-consistent information at a similar rate to higher-credibility, preference-inconsistent information. These results limit the generalizability of findings in both accounting and psychology research regarding individuals’ use of information based on the credibility of its source.

Keywords: investors, information search, preferences, credibility, experiment

JEL Classification: D83, M40, M41, M49

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Date posted: February 5, 2010  

Suggested Citation

Thayer, Jane M., Determinants of Investors’ Information Search: Credibility and Confirmation (February 3, 2010). Available at SSRN: http://ssrn.com/abstract=1547370

Contact Information

Jane M. Thayer (Contact Author)
University of Virginia ( email )
1400 University Ave
Charlottesville, VA 22903
United States
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