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To: scion who wrote (19303)	7/27/2010 2:21:55 PM
From: scion	Respond to of 19428

While our study focuses on investors’ information processing behavior on message boards our finding may be generalized to other contexts where decision makers with prior beliefs process new information before making decisions. For example, when a consumer who has a strong preference about a particular brand visits online Word-Of-Mouth networks (e.g., consumers’ review websites), she is more likely to accept the opinions that are consistent with her prior belief (Duan et al. 2009). Thus, she may make purchase decisions based on her biased beliefs, and overlook or underweight different opinions that are related to her purchase decisions. Also, a project manager within organizations may participate in internal knowledge management networks or project management networks where her team members discuss a project’s directions or decisions. However, if a project manager has a strong belief toward a particular way of the project, she will be disposed to seek and accept opinions that are aligned with her own opinions. Such behavior may lead to a project’s failure. Our model thus provides a foundation that can be extended to other contexts. This study also informs the behavioral finance literature. While investor behavior biases such as overconfidence have been widely observed in financial markets, less is known about the fundamental factors that generate those biases. Our analysis reveals that confirmation bias in investors’ interpretation of information could be a key factor that drives investor overconfidence. In addition, our results could provide guidance to online investors and financial infomediaries. Confirmation bias suggests that individuals become selective in information acquisitions according to their prior beliefs. To be unbiased in information acquisition and processing, investors should expose themselves to both confirming and disconfirming information, objectively assess the relevance and veracity of new information, and integrate all the information before making a decision. Message board operators can help investors by presenting both confirming and disconfirming opinions and warning participants that the selective information seeking may yield undesirable results. Confirmation Bias, Overconfidence, and Investment Performance: Evidence from Stock Message Boards papers.ssrn.com Download papers.ssrn.com