Towards ubiquitous information supply for individual investors: A decision support system design

Abstract

This paper introduces an IT artifact called MoFiN DSS that comprises hard- and software components that provide the basis for a prototype of a financial decision support system (DSS) to support individual investors reacting to unforeseen market events. We have derived our motivation for building such a system design from behavioral finance research. Analyses of the behavior of individual investors provide evidence that this segment does react more significantly to any public news published compared to institutional investors. On the other hand, the analyses show that they react significantly slower than their institutional counterparts. Since empirical intraday event study analyses show that capital markets react promptly to new information and that excess returns decrease over a specific period of time, individual investors miss significant trading opportunities due to their current strategies of information research. We address the problem that this market segment is not able to continuously observe diverse information channels and to assess all the new information available. Our prototype decision support system continuously observes company announcements and forecasts their potential impact on the corresponding stock price. After identifying those events for which significant market reactions can be expected, wireless push-based message services provide the technical basis for prompt and location-independent information supply. Based on a novel simulation-based evaluation methodology we have developed, we demonstrate and quantify the advantages that the developed system provides to the individual investors.