Can Prompting Investors to be in a Deliberative Mindset Reduce Their Reliance on Fake News?

Abstract

Using an experiment, we examine if prompting investors to be in a deliberative mindset reduces
their reliance on financial news that is later revealed to be fake. Consistent with theory, results
show that investors reduce their reliance on news revealed to be fake, and that this reduction is
magnified for investors who were previously prompted to be in a deliberative mindset.
Importantly, results also reveal that prompting investors to be in a deliberative mindset does not
cause investors to discount news that is later revealed to be true. Thus, our deliberative mindset
intervention did not result in an opportunity cost, which is important given our capital market
setting. Our study extends research on fake news in financial markets, provides new evidence on
how prompting individuals to be in a deliberative mindset can reduce the continued influence
effect, and has practical implications for individuals obtaining company information through
information intermediaries.

Keywords: fake news; deliberative mindset; continued influence effect; investor judgments

JEL Classification: G11, M40, M41, C91, D83