Long Series of Information and Nonprofessional Investors' Belief Revision

Abstract

This paper reports the results of an experiment designed to examine the effect of disclosure pattern (sequential versus simultaneous) and direction of information (positive/negative versus negative/positive) on nonprofessional investors' belief revisions. An important feature of the experiment is that long series of information are used. Prior research has largely examined individuals' belief revisions using short series of information. Results indicate that individuals revise beliefs to a larger extent when the disclosure pattern is sequential rather than simultaneous. The findings extend the prior belief revision literature by providing evidence that results hold using long series of information: the current experiment uses 20 pieces of information, whereas most accounting studies only use four pieces of information. Results also contribute to the extant financial accounting literature on nonprofessional investors that is particularly relevant given the larger number of inexperienced investors entering the marketplace and recent legislation that requires more detailed firm disclosures (e.g., the Sarbanes-Oxley Act [SOX] of 2002).