The Value of Investors Being in a Deliberative Mindset When Reading News Later Revealed to be Fake

48 Pages Posted: 9 Sep 2019 Last revised: 11 May 2022

See all articles by Stephanie M. Grant

Stephanie M. Grant

University of Washington

Frank D. Hodge

University of Washington - Michael G. Foster School of Business

Samantha C. Seto

Simon Fraser University (SFU) - Accounting Area; University of Washington, Michael G. Foster School of Business, Students

Date Written: May 10, 2022

Abstract

Investors face a difficult challenge in determining whether news they read is true or fake, and hence may inadvertently rely on fake news when making investment decisions. Compounding these concerns, psychology theory suggests that even if investors later learn that previously read news is fake, they will continue unintentionally relying on the news (i.e., a “continued influence”). We examine if prompting investors to be in a deliberative mindset reduces their reliance on news after they learn that it is fake without affecting their reliance on news later revealed to be true. Consistent with theory, investors adjust their valuation assessments when news is later revealed to be fake, and this adjustment is magnified for investors in a deliberative mindset. Importantly, a deliberative mindset does not cause investors to discount news later revealed to be true, which would otherwise introduce an unintended cost unique to our capital market setting.

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

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

Suggested Citation

Grant, Stephanie M. and Hodge, Frank Douglas and Seto, Samantha C, The Value of Investors Being in a Deliberative Mindset When Reading News Later Revealed to be Fake (May 10, 2022). Available at SSRN: https://ssrn.com/abstract=3444228 or http://dx.doi.org/10.2139/ssrn.3444228

Stephanie M. Grant (Contact Author)

University of Washington ( email )

Box 353200
Seattle, WA 98195-3200
United States
(206) 543-2904 (Phone)

Frank Douglas Hodge

University of Washington - Michael G. Foster School of Business ( email )

Paccar Hall 540, Box 353200
Seattle, WA 98195-3200
United States
206-616-8598 (Phone)
206-685-9392 (Fax)

Samantha C Seto

Simon Fraser University (SFU) - Accounting Area ( email )

Burnaby, British Columbia V5A 1S6
Canada

University of Washington, Michael G. Foster School of Business, Students ( email )

Box 353200
Seattle, WA 98195-3200
United States

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