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Determinants of Investors’ Information Search: Credibility and Confirmation

Posted: 5 Feb 2010  

Jane M. Thayer

University of Virginia

Date Written: February 3, 2010

Abstract

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

Suggested Citation

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

Jane M. Thayer (Contact Author)

University of Virginia ( email )

1400 University Ave
Charlottesville, VA 22903
United States

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