The Effects of Affiliation with Information Intermediaries on Investment Judgments

• In Event: Individual Investor Decisions

Abstract

In this paper, we experimentally examine how being affiliated with an information provider alters reactions to the information received from that provider. As individuals increasingly turn to the Internet for assistance with their investment decision-making, they face increasing opportunities to form affiliations with providers like online investment groups, message boards, or social media websites. Consistent with Social Identity Theory (Tajfel and Turner 1986), we find that the participants of our experiment weight information more (less) heavily when it is provided by a member of an investment group to which they belong (do not belong). We also find that this result is general to both favorable and unfavorable information. Process evidence is consistent with perceptions of the information’s credibility mediating the relation between group affiliation and information weighting. Our study contributes to practice by showing how the mere act of joining an online investment group might alter the way investors react to important information. Our study also contributes to research examining how new disclosure venues alter investment decisions, showing that obtaining information from a provider you identify with can increase your reliance on that information, holding all other factors constant.

Authors

• Timothy Brown, University of Illinois-Urbana-Champaign

• Nicole Cade, University of Pittsburgh

• Amanda Michelle Winn, University of Illinois-Urbana-Champaign