Does More Detailed Information Mean Better Performance? An Experiment in Information Explicitness

Posted: 19 Jun 2013

See all articles by Zilu Shang

Zilu Shang

University of Reading - ICMA Centre, Henley Business School

Chris Brooks

University of Reading - ICMA Centre

Rachel McCloy

University of Reading - School of Psychology

Date Written: June 18, 2013

Abstract

Investors are now able to analyse more noise-free news to inform their trading decisions than ever before. Their expectation that more information means better performance is not supported by previous psychological experiments which argue that too much information actually impairs performance. To test whether more information always means better performance in the stock markets, an experiment is conducted based on a trading simulation manipulated from a real market-shock. The results indicate that the explicitness of information neither improves nor impairs participants’ performance effectiveness from the perspectives of returns, share and cash positions, and trading volumes. However, participants’ performance efficiency is significantly affected by information explicitness. Although they need less time to implement their decisions when placing an order, explicitly informed investors are punished by making more mistakes.

Keywords: explicitness of information, performance effectiveness, performance efficiency, individual investors, experimental finance

JEL Classification: C91, D82, G02

Suggested Citation

Shang, Zilu and Brooks, Chris and McCloy, Rachel, Does More Detailed Information Mean Better Performance? An Experiment in Information Explicitness (June 18, 2013). Available at SSRN: https://ssrn.com/abstract=2281087

Zilu Shang

University of Reading - ICMA Centre, Henley Business School ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Chris Brooks (Contact Author)

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
+44 118 931 82 39 (Phone)
+44 118 931 47 41 (Fax)

Rachel McCloy

University of Reading - School of Psychology ( email )

Reading, RG6 6AH
United Kingdom

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