Insurance or signals? Student perception of pre-final assessed work

Abstract

Do students perceive pre-final exam assessed work (quizzes, midterms, etc.) as providing insurance against a poor final performance, or as means of signalling their 'quality' to the lecturer? The literature on insurance markets predicts that given a choice, poorer students would take on more pre-final assessed work (tests as insurance); and further that a greater number of pre-final tests would ceteris paribus, cause final exam performance to decline. However, the literature on market signalling, predicts that better students would take on more pre-final assessed work (tests as signals), and hence a greater amount of pre-final work would be associated with a better final performance. Using a data set of 528 students taking a single paper over a six-year period, it is possible to strongly reject the insurance hypothesis. It would appear that in the aggregate, students view pre-final assessed work as a signalling mechanism.