Information Cherry-Picking: When Confirmation Bias Met Anchoring Bias

59 Pages Posted: 4 Dec 2022

See all articles by Shiyang Huang

Shiyang Huang

The University of Hong Kong - Faculty of Business and Economics

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics

Yan Luo

Fudan University - School of Management

Ningyu Zhou

Fudan University - School of Management

Date Written: November 15, 2022

Abstract

We hypothesize that a surge in availability of information coupled with investors’ confirmation bias could aggravate retail investors’ behavioral biases due to their cherry-picking of information that only confirms their priors. We use the staggered EDGAR implementation to provide causal inference for our hypothesis. We find that retail investors’ anchoring tendency is amplified in the post-EDGAR period. The effect is most evident shortly after the release of corporate 10K/Q reports, for Internet users and sophisticated investors, and among stocks with higher information uncertainty. The exacerbated anchoring bias in the post-EDGAR period also makes retail investors lose more money in trading.

Keywords: EDGAR implementation, Confirmation bias, Anchoring bias, 52-week highs, Information cherry-picking, Information uncertainty

JEL Classification: D14; D83; D91; G12; G14; G38; G41

Suggested Citation

Huang, Shiyang and Lin, Tse-Chun and Luo, Yan and Zhou, Ningyu, Information Cherry-Picking: When Confirmation Bias Met Anchoring Bias (November 15, 2022). Available at SSRN: https://ssrn.com/abstract=4277399 or http://dx.doi.org/10.2139/ssrn.4277399

Shiyang Huang

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Yan Luo (Contact Author)

Fudan University - School of Management ( email )

No. 670, Guoshun Road
No.670 Guoshun Road
Shanghai, 200433
China

Ningyu Zhou

Fudan University - School of Management ( email )

No. 670, Guoshun Road
No.670 Guoshun Road
Shanghai, 200433
China

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