The corporate memory structure of expert portfolio managers: a multi‐trial free recall study

This research studied the memory structures for company information of twelve expert investment portfolio managers. These memory structures are important because they influence equity portfolio selection decisions worth billions of dollars. The structures have relevance to accounting and finance in that they should influence (1) the information accountants provide, (2) accounting and finance education, and (3) expert systems for investment portfolio management. Based on theory and an exploratory study, nine hypotheses were developed. These were tested in a multi‐trial free recall study. The research results showed that both expert portfolio managers and novices clustered their recall. The experts had higher clustering scores initially, but the novices’ scores increased at a faster rate over the trials. The experts used two schematic and four unidimensional bases of categorisation to assist in equity portfolio selection. Of these, industrial schemata seem to dominate in their memory structures. The experts used these industrial schemata to assist their recall. They do not, however, simply adopt the stock exchange’s industrial categories. They tend to lead rather than follow the exchange. While the experts used industrial schemata to facilitate recall, novices used more trivial bases. These findings supported all of the research hypotheses. Finally, the paper considers the implications of the findings for future research and accounting and finance practice.