Because firms are likely to release both good and bad news in close proximity to each other, it is important to understand what impact a long information set of mixed directional (i.e., both good and bad news) disclosures has on nonprofessional investors' stock price valuation decisions. Previous experimental research has identified information order effects as a critical factor impacting the decisions made by nonprofessional investors. However, the efficient market hypothesis predicts that individual biases are eliminated by the presence of market incentives, an element that is missing in prior studies on the effects of long information sets disclosures. Consequently, this study seeks to understand if and how order effects prevail in a market setting that includes economic incentives.
Our findings indicate that initial primacy effects revert to recency effects over time. These results offer insights regarding how nonprofessional investors process mixed information disclosures over time and should be of interest to firm managers and investors, since firms that release information to investors want to know what effects, if any, information order/disclosure patterns have on investors' long-term firm valuations.
Data Availability: Data are available from the first author upon request.