An Examination of Order Effects on Investors’ Judgments in an Emerging Market:An Experimental Market Setting

Document Type : Original Article

Authors

1 Accounting department Faculty of Management and Technology Arab Academy for Science and Technology and Maritime Transport Alexandria Egypt

2 University of Illinois Urbana-Champaign, USA And Alexandria University Alexandria Egypt

Abstract

This study examines the order effect of sequential presentation of different types of information (positive versus negative) on nonprofessional investors’ decisions with respect to stock valuations in Egypt as an example of emerging stock market. It utilizes an experimental economics methodology to test how investors react to a series of positive and negative information items when such items are presented in different order.  Three series of laboratory doubleauction experiments were conducted, where the subjects were presented by a series of good and bad news information items.  In the first (the control condition) participants were provided with a positive and a negative pieces of information in each trading period, while in the second experiment (the primacy condition) they were provided two bad news in one period and two good news in the following one.  Finally in the third experiment (the recency condition), participants were provided first with the two good news followed by the two bad news.  The results indicate strong evidence for primacy effect no matter the type of news provided since the news provided first in both conditions (recency and primacy) prevailed regardless of the type of the news presented (good or bad).

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