The influence of textual presentation order and graphical presentation on the judgements of non-professional investors

Abstract

The aim of this study is to examine the influence of textual presentation order and graphical presentation on the judgements of non-professional investors. Adopting an experimental approach and drawing on the belief-adjustment model, the study captures whether a recency effect prevails and whether this effect can be moderated by the inclusion of a graph. Additionally, the study utilises eye-tracking to provide a novel insight into the processes individuals use to assess financial information and form judgements. The results reveal that non-professional investors are susceptible to recency effects due to the strategic presentation ordering of narrative information. Non-professional investors give a lower performance rating if the negative information is presented last. The recency effect is not reduced through the inclusion of a graph.

Keywords:

• impression management
• order effect
• recency effect
• graphical presentation
• investor judgements
• decision-useful information

Acknowledgements

We would like to acknowledge the feedback received from the seminar participants at the University of Western Australia, Edith Cowan University, University of Nagoya, University of Goettingen and the Katholische Universität Eichstätt-Ingolstadt. We would like to sincerely thank the two reviewers and the editors for insightful comments that greatly enhanced the quality of the paper. All remaining errors are ours.

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Andreas Hellmann http://orcid.org/0000-0002-3573-5344

Lurion De Mello http://orcid.org/0000-0002-2625-7969

Notes

1 Non-professional investors are relevant to stock markets and hence an important stakeholder group that utilises financial information. Non-professional investors may be active in stock markets in different ways, for example, by trading stocks directly or through their self-managed superannuation account. In this context, Australia is a good example. According to the Australian Prudential Regulation Authority (2016), self-managed superannuation funds value $2.1 trillion at the end of the June 2016 quarter.

2 A potential fourth condition would be to include graphical representation of negative information. However, prior literature shows that management are more likely to include graphs highlighting favourable performance instead of graphs highlighting unfavourable performance (e.g. Beattie and Jones 2000, Jones 2011). Hence, this study did not include a condition with graphical representation of negative information.

3 Prior to the administration of the experiment, a pilot test of the experimental stimulus and questionnaire was conducted to ensure that they were understandable, logically articulated, readable and appropriate in layout. The pilot study was trialled on eight non-professional investors and academics. Amendments made to the experimental stimulus after the pilot test included consistency in units and shortening some sentences that were perceived as too complex. Changes made to the questionnaire included swapping the order of certain questions to improve their logical flow, re-phrasing instructions and revising the consistency of the categories provided.

4 Courses included International Accounting, Current Issues in Accounting, Intermediate Financial Accounting, Issues in Applied Finance, Financial Risk Management, Applied Portfolio Management, Advanced Corporate Finance.

5 Summation (dwell-time) method refers to the average stationary signals over a specified period whereby a fixation is identified if the duration exceeds the predetermined threshold (Duchowski 2007, pp. 138–41).

6 Differentiation (velocity detection) method refers to determining eye movement velocities whereby a fixation is identified if the velocity falls below the predetermined threshold (Duchowski 2007, pp. 138–41).

7 As outlined before, such fixations are defined as 180–275 milliseconds for visual search and 225–250 milliseconds silent reading fixations (Rayner 2009).