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Take your time: How delayed information and restricted decision opportunities improve belief formation in investment decisions

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  • Trutmann, Kevin
  • Heinke, Steve
  • Rieskamp, Jörg

Abstract

Investors’ belief-updating is often influenced by factors such as the current investment position and whether information is subjectively favorable. Such motivated beliefs can lead to profit harming decisions. We argue that the degree of involvement with the development of an investment is a driver of such motivated beliefs. In a pre-registered experiment we aim to lower involvement by delaying information and committing participants to a portfolio. We show that this brings participants’ beliefs significantly closer to a Bayesian benchmark. Separating information processing and belief-updating from decisions thus appears as a promising and easy to implement intervention to improve financial decisions.

Suggested Citation

  • Trutmann, Kevin & Heinke, Steve & Rieskamp, Jörg, 2023. "Take your time: How delayed information and restricted decision opportunities improve belief formation in investment decisions," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322006195
    DOI: 10.1016/j.frl.2022.103442
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    References listed on IDEAS

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    More about this item

    Keywords

    Investing; Beliefs; Expectations; Information processing; Involvement; Intervention;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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