Learning and Confirmation Bias

UNIVERSITY OF TECHNOLOGY SYDNEY

Finance Discipline Group Research Seminars in Finance

Topic: Learning and Confirmation Bias: How first impressions and ambiguous signals influence perceptions and financial advice

Speaker: Susan Thorp, University of Sydney

Abstract: One puzzling observation in the financial services sector is that even though consumers in general tend to distrust financial advisers, and that advisers have been shown to provide poor quality service in a sizeable number of cases, clients usually trust their own financial adviser and believe that the advice they are being given is good. A possible explanation for this discrepancy is confirmation bias, where consumers interpret ambiguous information in agreement with existing beliefs or first impressions. We test this explanation on responses to an online choice experiment. Respondents evaluated two financial advisers who gave good and bad advice on four topics and who did or did not display a certification. Our empirical results show that the sequence of difficult or easy advice topics combined with good or bad advice as well as the adviser’s certification impacts respondents’ evaluations of advisers. The choices of around 60% of respondents exhibit significant confirmation bias that also influences their willingness to pay (WTP) for subsequent advice. Our results suggest that first impressions and ambiguous signals have far reaching consequences that are likely to be underestimated by traditional learning models and have important implications for any situation where people update their preferences.

A light lunch will be provided at 1p.m. Please RSVP for catering purposes to Mala Kapahi by 12 noon on Monday, 21st August.

Date: Wednesday, 23rd August 2017     

Time: 12.00 – 1.00 p.m.

Venue: University of Technology, Sydney           

Building 8, Room 8.002 Dr Chau Chak Wing Building

14 - 28 Ultimo Road, Ultimo

Coordinator: Adrian Lee (Ph: +61 2 9514 7765)

Enquiries: Mala Kapahi (Ph: +61 2 9514 7777)