How Do You Really Feel?: Two Experiments on the Impact of Affect on Investor Judgment and Decision Making
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Authors
Wynes, Michael
Date
Type
thesis
Language
eng
Keyword
Accounting , Emotion , Affect , Investor Behavior
Alternative Title
Abstract
The purpose of this thesis is to understand how investor judgments and decisions around an
earnings announcement are influenced by affect. In the first study, I examine the impact of
unrelated tweets on investor judgments when they receive a positive earnings announcement
through Twitter. I find that both negative and positive affect elicited by posts in an investor’s
Twitter feed unrelated to the investment results in investment attractiveness judgments that are
lower than when unrelated tweets are neutral in tone. I find that a warning from the SEC about
the impact of these irrelevant Twitter posts helps to reduce the influence of only negative
incidental affect. Further analysis reveals that an investor’s ability to understand the cause and
effect relationship of emotions achieves a similar debiasing result. In the second study, I examine
how two types of negative affect, anger and fear, influence investor behavior after a negative
earnings announcement. I find that anger and fear lead to very different information search and
processing behaviors. Anger, while not impacting how much additional information an investor
accesses, reduces how much time they spend reading materials and how deeply the information
is processed. In contrast, fear leads to an increase in how much additional information is
accessed, as well as increases the amount of time spent reading the materials; it also leads to
better recall of that information. Results also show that anger causes investors to allocate less
money to the firm that just announced negative earnings whereas fear did not affect investment.
Finally, my results show that an investor’s ability to manage his/her emotions can reduce the
influence of anger on investment decisions. Together, these studies extend the accounting and
psychology literatures related to affect, earnings announcements, social media, attributions, and
emotional intelligence. My findings have practical importance, suggesting that investors,
managers, and regulators need to be aware that affect can arise due to the channel used to
disseminate earnings and the language used by managers to explain earnings performance. The
positive takeaway is that emotionally intelligent investors can insulate themselves from the
influence of affect.
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Copying and Preserving Your Thesis
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ProQuest PhD and Master's Theses International Dissemination Agreement
Intellectual Property Guidelines at Queen's University
Copying and Preserving Your Thesis
This publication is made available by the authority of the copyright owner solely for the purpose of private study and research and may not be copied or reproduced except as permitted by the copyright laws without written authority from the copyright owner.