On the Economic Effects of Exploratory Behavior upon Decision-Aid Use: Evidence from Autocomplete and Financial Markets

29 Pages Posted: 29 Aug 2017 Last revised: 1 Dec 2019

See all articles by Eran Rubin

Eran Rubin

University of Akron - College of Business Administration

Amir Rubin

Simon Fraser University (SFU) - Beedie School of Business; Interdisciplinary Center (IDC) Herzliyah

Date Written: August 22, 2017

Abstract

Research on human biases stemming from the use of decision aids has predominantly dealt with human tendencies to reduce cognitive effort. In this research we examine a bias that results from the human tendency for exploratory behavior. We frame our analysis within a natural experiment setting and analyze the text completion aid (autocomplete) within the financial markets domain. In financial markets, investment options are relatively fixed but may occasionally change as new securities (tickers) are introduced to the markets. Theory on exploratory behavior suggests that when new tickers are introduced, the autocomplete decision aid can facilitate diversion of the users from their initially intended ticker to the newly introduced ticker. We analyze whether such diversions make an economic impact in terms of transaction loss. Consistent with our hypothesis, we provide evidence that upon ticker introduction, turnover of securities that are syntactically similar to the new introduced security is significantly reduced by 3%-5% around the starting day of trade of the new security. Exploratory behavior upon decision making appears to have a significant economic effect on transactions.

Keywords: Exploratory behavior, Decision bias, Input text, Financial markets, Transactions, Turnover

JEL Classification: O16, D91

Suggested Citation

Rubin, Eran and Rubin, Amir, On the Economic Effects of Exploratory Behavior upon Decision-Aid Use: Evidence from Autocomplete and Financial Markets (August 22, 2017). Available at SSRN: https://ssrn.com/abstract=3023857 or http://dx.doi.org/10.2139/ssrn.3023857

Eran Rubin

University of Akron - College of Business Administration ( email )

Akron, OH 44325-4803
United States
330-9726443 (Phone)

Amir Rubin (Contact Author)

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

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