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Does More Detailed Information Mean Better Performance? An Experiment in Information Explicitness

Author

Listed:
  • Zilu Shang

    (ICMA Centre, Henley Business School, University of Reading)

  • Chris Brooks

    (ICMA Centre, Henley Business School, University of Reading)

  • Rachel McCloy

    (University of Reading)

Abstract

Investors are now able to analyse more noise-free news to inform their trading decisions than ever before. Their expectation that more information means better performance is not supported by previous psychological experiments which argue that too much information actually impairs performance. To test whether more information always means better performance in the stock markets, an experiment is conducted based on a trading simulation manipulated from a real market-shock. The results indicate that the explicitness of information neither improves nor impairs participants' performance effectiveness from the perspectives of returns, share and cash positions, and trading volumes. However, participants' performance efficiency is significantly affected by information explicitness. Although they need less time to implement their decisions when placing an order, explicitly informed investors are punished by making more mistakes.

Suggested Citation

  • Zilu Shang & Chris Brooks & Rachel McCloy, 2013. "Does More Detailed Information Mean Better Performance? An Experiment in Information Explicitness," ICMA Centre Discussion Papers in Finance icma-dp2013-05, Henley Business School, University of Reading.
    • Handle: RePEc:rdg:icmadp:icma-dp2013-05
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    Keywords

    explicitness of information; performance effectiveness; performance efficiency; individual investors; experimental finance;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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