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Investor information search

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  • Loibl, Cäzilia
  • Hira, Tahira K.

Abstract

Few will disagree that information search is essential in making investment decisions, a high-consequence decision task. Yet, the sources of investor information have never been used as a segmentation base to study investment behavior. We analyze survey results of investors in the US using information search, demographic, psychological, and involvement variables. Cluster analysis shows five typologies for investor information search based on sources of information. We also discover the majority of investors perform moderate- to low-information gathering strategies. The 11 demographics variables were insufficient to describe the typologies, although we did find higher-educated male investors with higher earnings more likely to practice a high-information search strategy, confirming previous studies. Turning to the psychological and involvement variables, we develop distinct typologies and identify several significant predictors for the five investor groups. For the majority of investors, investment decisions present a considerable and unwillingly undertaken challenge, and this study concludes with a discussion of how to target these investor typologies with approaches grounded in behavior-change theory.

Suggested Citation

  • Loibl, Cäzilia & Hira, Tahira K., 2009. "Investor information search," Journal of Economic Psychology, Elsevier, vol. 30(1), pages 24-41, February.
    • Handle: RePEc:eee:joepsy:v:30:y:2009:i:1:p:24-41
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    2. Agarwal, Shweta & Kumar, Shailendra & Goel, Utkarsh, 2019. "Stock market response to information diffusion through internet sources: A literature review," International Journal of Information Management, Elsevier, vol. 45(C), pages 118-131.
    3. Muehlfeld, Katrin & Weitzel, Utz & van Witteloostuijn, Arjen, 2013. "Fight or freeze? Individual differences in investors’ motivational systems and trading in experimental asset markets," Journal of Economic Psychology, Elsevier, vol. 34(C), pages 195-209.
    4. Astaiza-Gómez, José Gabriel, 2021. "Investors' Information Choice," MPRA Paper 110008, University Library of Munich, Germany.
    5. K. N. Rathi & D. Geetha, 2024. "Relationship between Rational and Irrational Investment Decisions and Multiple Intelligence of Investors," International Journal of Economics and Financial Issues, Econjournals, vol. 14(4), pages 282-289, July.
    6. repec:eme:qrfmpp:v:3:y:2011:i:2:p:6-25 is not listed on IDEAS
    7. Adeel Mumtaz & Tahir Saeed & M. Ramzan, 2018. "Factors affecting investment decision-making in Pakistan stock exchange," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 5(04), pages 1-14, December.
    8. Oppewal, Harmen & Paas, Leonard J. & Crouch, Geoffrey I. & Huybers, Twan, 2010. "Segmenting consumers based on how they spend a tax rebate: An analysis of the Australian stimulus payment," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 510-519, August.
    9. Ann Yang, 2013. "Decision Making for Individual Investors: A Measurement of Latent Difficulties," Journal of Financial Services Research, Springer;Western Finance Association, vol. 44(3), pages 303-329, December.
    10. Pennington, Robin R. & Kelton, Andrea Seaton, 2016. "How much is enough? An investigation of nonprofessional investors information search and stopping rule use," International Journal of Accounting Information Systems, Elsevier, vol. 21(C), pages 47-62.
    11. Lemieux, James & Peterson, Robert A., 2011. "Purchase deadline as a moderator of the effects of price uncertainty on search duration," Journal of Economic Psychology, Elsevier, vol. 32(1), pages 33-44, February.
    12. Pascual-Ezama, David & Paredes, Mercedes Rodríguez & Sanchez-Martín, María-del-Pilar & de Liaño, Beatriz Gil-Gómez, 2018. "Shorter and easier is more useful: A longitudinal analysis of how financial report enforcement affects individual investors," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 74(C), pages 29-37.
    13. K.S. Muehlfeld & G.U. Weitzel & A. van Witteloostuijn, 2012. "Fight or freeze? Individual differences in investors’ motivational systems and trading in experimental asset markets," Working Papers 12-18, Utrecht School of Economics.
    14. Chowdhury, Ashiqul Haq & Priyo, Asad Karim Khan, 2019. "How Do Bangladeshi Investors Take Decisions? An Ethnographic Decision Tree Model of Stock Selection," MPRA Paper 118105, University Library of Munich, Germany.
    15. Clarence Goh, 2024. "Analysts’ Earnings per Share Forecasts: The Effects of Forecast Uncertainty and Forecast Precision on Investor Judgements," Abacus, Accounting Foundation, University of Sydney, vol. 60(1), pages 172-204, March.
    16. Chengguang Li & Oded Shenkar & William E. Newburry & Yinuo Tang, 2021. "How Country Reputation Differentials Influence Market Reaction to International Acquisitions," Journal of Management Studies, Wiley Blackwell, vol. 58(6), pages 1609-1639, September.

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