Nonprofessional Investor Judgments: Linking Dependent Variables to Constructs

66 Pages Posted: 27 Aug 2021 Last revised: 13 Jul 2022

See all articles by H. Scott Asay

H. Scott Asay

University of Iowa - Department of Accounting

Jeffrey Hales

University of Texas at Austin - Department of Accounting

Cory Hinds

University of Iowa - Department of Accounting

Kathy Rupar

Georgia Institute of Technology

Date Written: July 12, 2022

Abstract

There is limited evidence on the construct validity of the dependent variables commonly used in
the literature on nonprofessional investor judgments. In this paper, we first survey the literature
to understand the types of dependent variables typically used by researchers. We then conduct
factor analyses to uncover linkages between dependent variables and nonprofessional investor
judgment constructs. Our results suggest that, while the wide variety of dependent variables can
appear on their face to represent many nuanced economic constructs, these measures load onto
three distinct factors. These factors relate to nonprofessional investors’ (1) expectations
regarding future firm performance and value, (2) wholistic perceptions of the firm, and (3)
evaluations of the risk associated with investing in the firm. Next, we provide recommendations
for selecting, analyzing, and reporting dependent variables in future research. Finally, we
conclude by providing directions for future research to further our understanding of the
judgments made by investors.

Keywords: investor judgments, construct validity, experimental design

Suggested Citation

Asay, Hamilton Scott and Hales, Jeffrey and Hinds, Cory and Rupar, Kathy, Nonprofessional Investor Judgments: Linking Dependent Variables to Constructs (July 12, 2022). Available at SSRN: https://ssrn.com/abstract=3910069 or http://dx.doi.org/10.2139/ssrn.3910069

Hamilton Scott Asay

University of Iowa - Department of Accounting ( email )

S232 Pappajohn Business Building
Iowa City, IA 52242-1000
United States

Jeffrey Hales

University of Texas at Austin - Department of Accounting ( email )

Austin, TX 78712
United States
512-471-2163 (Phone)
512-471-3907 (Fax)

Cory Hinds (Contact Author)

University of Iowa - Department of Accounting ( email )

W347 Pappajohn Business Building
Iowa City, IA 52242-1000
United States

Kathy Rupar

Georgia Institute of Technology ( email )

800 W Peachtree St NW
Suite 445
Atlanta, GA 30308-1149
United States
4043855713 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
243
Abstract Views
676
rank
178,987
PlumX Metrics