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What Affects Individuals' Decisions to Acquire Forecasted Information?

Author

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  • LUCY F. ACKERT
  • BRYAN K. CHURCH
  • MOHAMED SHEHATA

Abstract

. Individuals may acquire forecasted information because forecasters (e.g., analysts) possess superior information, superior forecasting abilities, or both. We conduct a series of experimental sessions to investigate individuals' information acquisition decisions. In our experimental setting, individuals are able to acquire unprocessed information (which is analogous to that used by analysts), processed information (which is analogous to that produced by analysts), or both. We examine the effects of forecast bias and economic stability on the type of information acquired. Our results suggest that individuals are less inclined to acquire unprocessed information as economic stability decreases. Under conditions of economic instability, they are more inclined to acquire processed information, and processed and unprocessed information combined. Forecast bias, on the other hand, does not affect individuals' information acquisition decisions. Individuals appear to recognize the optimism contained in biased forecasts and attempt to adjust for such biases. Our results also suggest that individuals can more effectively use processed information than unprocessed information, regardless of the degree of forecast bias. Our overall findings suggest that individuals acquire forecasts because forecasters are perceived to have superior (processing) abilities. Lastly, our results suggest that in using information individuals are prone to make pessimistic predictions. Résumé. Les particuliers ont accès à de l'information prévisionnelle grâce aux prévisionnistes (les analystes, par exemple) qui possédent de l'information de qualité supérieure, des capacités prévisionnelles plus grandes ou les deux. Les auteurs ont procédé à une série de séances expérimentales visant à étudier les décisions d'acquisition d'information des particuliers. Selon le plan d'expérience de l'étude, les particuliers ont la possibilité d'acquérir de l'information non traitée (analogue à celle qu'utilisent les analystes), de l'information traitée (analogue à celle que produisent les analystes) ou les deux. Les auteurs étudient les conséquences des distorsions prévisionnelles et de la stabilité économique sur la nature de l'information acquise. Les résultats obtenus donnent à penser que les particuliers sont moins enclins à acquérir de l'information non traitée lorsque la stabilité économique s'effrite. En situation d'instabilité économique, ils sont davantage enclins à acquérir de l'information traitée et une combinaison d'information traitée et non traitée. La distorsion prévisionnelle, d'autre part, n'a pas d'incidence sur les décisions d'acquisition d'information des particuliers. Ces derniers semblent déceler l'optimisme que contiennent les prévisions affectées par la distorsion et tentent d'ajuster leur interprétation pour tenir compte de cette distorsion. Les constatations des auteurs laissent également supposer que les particuliers peuvent utiliser à meilleur escient l'information traitée que l'information non traitée, peu importe le degré de distorsion prévisionnelle. Dans l'ensemble, leurs conclusions suggèrent que les particuliers font l'acquisition d'information prévisionnelle parce qu'ils considèrent que les prévisionnistes possèdent des compétences (celles de traiter l'information) supérieures aux leurs. En dernier lieu, les résultats obtenus par les auteurs révèlent que les particuliers, lorsqu'ils utilisent l'information qu'ils ont acquise, ont tendance à formuler des prévisions pessimistes.

Suggested Citation

  • Lucy F. Ackert & Bryan K. Church & Mohamed Shehata, 1996. "What Affects Individuals' Decisions to Acquire Forecasted Information?," Contemporary Accounting Research, John Wiley & Sons, vol. 13(2), pages 379-399, September.
    • Handle: RePEc:wly:coacre:v:13:y:1996:i:2:p:379-399
    DOI: 10.1111/j.1911-3846.1996.tb00507.x
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    2. Ackert, Lucy F. & Church, Bryan K. & Zhang, Ping, 2004. "Asset prices and informed traders' abilities: Evidence from experimental asset markets," Accounting, Organizations and Society, Elsevier, vol. 29(7), pages 609-626, October.
    3. El-Hussein E. El-Masry, 2008. "Factors affecting auditors' utilization of evidential cues," Managerial Auditing Journal, Emerald Group Publishing, vol. 23(1), pages 26-50, January.
    4. Lucy F. Ackert & Bryan K. Church & Ping Zhang, 1999. "The effect of forecast bias on market behavior: evidence from experimental asset markets," FRB Atlanta Working Paper 99-4, Federal Reserve Bank of Atlanta.
    5. Orens, Raf & Lybaert, Nadine, 2007. "Does the financial analysts' usage of non-financial information influence the analysts' forecast accuracy? Some evidence from the Belgian sell-side financial analyst," The International Journal of Accounting, Elsevier, vol. 42(3), pages 237-271.

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