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Does more detailed information mean better performance? An experiment in information explicitness

Zilu Shang (ICMA Centre, University of Reading, Reading, UK)
Chris Brooks (ICMA Centre, University of Reading, Reading, UK)
Rachel McCloy (School of Psychology and Clinical Language Sciences, University of Reading, Reading, UK)

Review of Behavioral Finance

ISSN: 1940-5979

Article publication date: 4 November 2014

Abstract

Purpose

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. The purpose of this paper is to examine whether the degree of information explicitness improves stock market performance.

Design/methodology/approach

An experiment is conducted in a computer laboratory to examine a trading simulation manipulated from a real market-shock. Participants’ performance efficiency and effectiveness are measured separately.

Findings

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.

Originality/value

The novel approach and findings of this research add to the knowledge of the impact of information explicitness on the quality of decision making in a financial market environment.

Keywords

Acknowledgements

The authors would like to thank Phil Holmes, co-editor of this journal, and Ioannis Oikonomou for useful comments that improved a previous version of this paper.

Citation

Shang, Z., Brooks, C. and McCloy, R. (2014), "Does more detailed information mean better performance? An experiment in information explicitness", Review of Behavioral Finance, Vol. 6 No. 2, pp. 86-103. https://doi.org/10.1108/RBF-10-2013-0036

Publisher

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Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited