The Information Acquisition Process of Individual Investors

Abstract

Financial service companies can access a huge amount of data on customer behavior, in particular with respect to the information search process prior to an investment decision. With the help of an experiment, we show that investors’ pre-decisional behavior is linked to their level of confidence about the investment decision. We find that an increasing number of transitions between different information can serve as a signal for low confidence about the decision. We argue that this finding can help financial institutions when trying to offer tailored financial advice. Finally, we extend previous studies that were not able to observe the pre-decisional process by providing direct evidence on attention paid to different fund attributes.