Langer et al. (1978) refer to a certain type of irrelevant data as “placebic information”. When making investment decisions, retail investors commonly receive a considerable amount of placebic information from financial advisors, analyst reports, oetc. The purpose of our study is to analyze how investors perceive placebic information and whether placebic information influences investors’ stock price forecasts. For our analysis we initiate a questionnaire-based stock price forecast competition. 197 participants are asked to forecast the stock price in three months’ time and an upper and lower bound of the stock price that will not be exceeded or undercut with more than five percent probability, respectively, within the next three months. With an increasing amount of placebic information, participants state to have significantly more relevant information available to accurately forecast the stock price. Hence, participants are subject to an information illusion as they perceive placebic information as actually relevant information.
Author(s): Andreas Oehler, Matthias Horn, Stefan Wendt
