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The impact of analyst report complexity on trading decisions in an experimental setting

Author

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  • Wojahn, Oliver
  • Geister, Susanne
  • Richter, Julia

Abstract

This paper examines the relationship between the complexity of an analyst report and its trading impact in an experimental setting. Several hypotheses regarding this relationship have been proposed. On the one hand, complexity may be perceived as a signal for analyst competence and thus would be positively associated with trading. On the other hand, a more complex report is likely to contain ambiguous information and, due to ambiguity aversion, diminish the trading impact. Empirical studies have found evidence for both hypotheses and are difficult to reconcile. In a laboratory experiment, we find that the complexity of an analyst report has neither a significant impact on the perceived competence of the analyst nor does it significantly impact ambiguity towards the company analyzed. We also find that there is no significant association between report complexity and trading decisions.

Suggested Citation

  • Wojahn, Oliver & Geister, Susanne & Richter, Julia, 2015. "The impact of analyst report complexity on trading decisions in an experimental setting," Journal of Behavioral and Experimental Finance, Elsevier, vol. 7(C), pages 29-32.
    • Handle: RePEc:eee:beexfi:v:7:y:2015:i:c:p:29-32
    DOI: 10.1016/j.jbef.2015.05.002
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    Cited by:

    1. Bernhard Ganglmair & Julia Krämer & Jacopo Gambato, 2024. "Regulatory Compliance with Limited Enforceability: Evidence from Privacy Policies," CRC TR 224 Discussion Paper Series crctr224_2024_547v2, University of Bonn and University of Mannheim, Germany, revised Sep 2024.

    More about this item

    Keywords

    Analyst reports; Readability; Ambiguity aversion; Analyst ability;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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