Anger, Fear, and Investor’s Information Search Behavior

Abstract

This study investigates the differential effect of anger and fear on investors information search behavior. Based on theories from psychology, I predict that angry investors will seek out less additional information and exert a lower depth of thought than fearful investors after a negative earnings surprise. Additionally, I predict that these differences will be moderated in investors that exhibit higher levels of emotion management ability. Using an experiment, I find that neither anger nor fear had any effect on the number of additional information sources investors access. However, angry investors processed information less deeply than fearful investors. This is evident by significant differences in the amount of time spent reading additional information and the ability to recall details about the information. Finally, high emotion management ability reduces differences in depth of thought for both angry and fearful investors. The results of this study have implications for investors and researchers.