Do stock investors need to discuss to reduce decision bias?

The research examines the role of discussion in investors’ decision in a step-by-step information setting. Several studies present that disclosure strategy stimulates order-effect bias, but simultaneous information decreases the impact of that bias. This bias makes people weigh more heavily to recent observations than they do to older ones. Using step-by-step information, a recency effect is expected to be found. This study uses an experimental method. The participants are the representation of non-professional investors in the stock market because of a lack of knowledge and experience. Participants are also a reflection of the customer easiness in registering to be stock traders. The role of discussion between participants is a new feature of this experiment. After evaluating participants’ decision in a discussion, the experiment shows that an individual’s choice after discussion produces more bias, although they already learn the information before the discussion. The research finds that (1) using the within-subject sample, group discussion produces overvaluation (undervaluation) in positive (negative) sequential information, (2) there is bigger price revision when negative sequential information is presented. This study suggests disclosure strategies for companies. Considering a recency bias, companies must present step-by-step information when they disclose good news, but they must avoid step-by-step disclosures when giving bad news. The second practical implication is for investors; they need to think about the benefits of joining an investor club, since the discussion exacerbates recency bias. These results are expected to contribute to finance literature.