Information sources and investing decisions – a path modeling approach
Abstract
Purpose
Given the special feature of institutional investors in Malaysia, the purpose of this paper is to explore how these investors acquire and employ different information sources in their investing decisions.
Design/methodology/approach
The study uses self-reported information sources collected via a survey of 66 institutional investors following convenience sampling, and estimates the relationship via Smart-PLS (Partial Least Squares) path modeling.
Findings
The results suggest that although investors place greater importance on fundamental and technical indicators, they do not implement these information sources in their decisions. Rather, gathering information from economic statistics and ratios, discussion with colleagues, historical returns of the Malaysian stock market, decisions of other market players, specialized press and stock exchange bulletins, and statements of opinion leaders are more closely related to trading, risk taking, and financial asset holding. This finding supports the limited information processing of bounded rationality, irrespective of the type of information source.
Practical implications
Institutional investors should critically assess the information sources upon which they rely to collect information as irrational information processing may adversely affect the stock market efficiency.
Originality/value
To the authors’ knowledge, this is the first study to explore the unique features of institutional investors in Malaysia in conjunction with their sources of information, and to identify which sources matter when making investing decisions.
Keywords
Acknowledgements
The authors would like to thank the editor and anonymous referees for their helpful suggestions. The financial support provided by the Ministry of Higher Education (MOHE), Malaysia, under the Fundamental Research Grant Scheme (Grant No. EP20101103001) is gratefully acknowledged.
Citation
Khan, M.T.I., Tan, S.-H. and Chong, L.-L. (2017), "Information sources and investing decisions – a path modeling approach", Managerial Finance, Vol. 43 No. 8, pp. 928-947. https://doi.org/10.1108/MF-08-2016-0232
Publisher
:Emerald Publishing Limited
Copyright © 2017, Emerald Publishing Limited