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School of Business | Department of Finance | Finance | 2012
Thesis number: 12910
Investment decision making: The role of information and asset performance
Author: Tala, Teemu
Title: Investment decision making: The role of information and asset performance
Year: 2012  Language: eng
Department: Department of Finance
Academic subject: Finance
Index terms: rahoitus; financing; behavioral finance; behavioral finance; päätöksenteko; decision making; sijoitukset; investments; informaatio; information; tieto; knowledge
Pages: 96
Key terms: behavioral finance; decision making; information overload; framing; the disposition effect; overconfidence; anchoring bias; reference point adaption

Purpose of the study

The purpose of this study is to determine how well known decision making biases are affected by the availability of information in an investment decision making situation. The results of this study have also practical applications. The study offers insight on how information should be presented to investors and what kind of behavior can be expected when investor is presented with certain kind of information. This information can be utilized e.g. by the financial advisors and also by stock brokerage companies to better serve and advise the customer.


The data for this study was gathered through a survey where subjects were asked to fill out a questionnaire about investment decision making. 161 questionnaires were returned to the author and after cleaning out the incomplete questionnaires and the questionnaires which were answered against the instructions, 133 questionnaires were accepted to the analysis. The survey was conducted during the spring of 2011 and the sample consists of students primarily from the Aalto University School of Economics


The results indicate that the availability of simple aggregated information about portfolio’s performance has significant effect on several biases. The effect is the most profound for those biases which depend on interpreting the performance of the combined portfolio. These biases are overconfidence bias, anchoring bias and reference point adaption bias. In addition, the results show that past asset performance is also related to the strength of decision making biases. The results are strongest for the disposition effect, belief in mean reversion and overconfidence.

The results also support the notion, that decision maker has to utilize vast amount of information in a decision making process, she is prone to suffer from information overload. Thus, decision makers “seek for simplicity” in order to lover to lower their cognitive burden.
Master's theses are stored at Learning Centre in Otaniemi.