Information behaviour of online investors

Online trading has now become the prevalent form of stock market investing. With a large
percentage of investors online, understanding how they gather, use and share information is of
major interest to service providers, regulators, researchers and to investors themselves. Previous
studies have examined the adoption of online investing, the impact of online stock forums on
markets and the information content of stock forums. A relatively limited number of studies
have investigated the information seeking practices of online investors. This study sought a
deeper understanding of what drives the information behaviour of online investors.

This research reports on a qualitative study that interviewed 26 online investors about their
information practices and social networks. The interview transcripts were analysed using a
Grounded Theory methodology and the research process was also influenced by aspects of
Multi-Grounded Theory. A new Theory of Online Investor Information Behaviour has been
developed as a result of the analysis.

The theory introduces the concept of an Investment Persona – a role that an investor takes on –
that has a large impact on their information seeking behaviour. Investors may take on multiple
Personas simultaneously. A number of distinct Persona types were identified in the study: Long
Term Investor, Income Generator, Trader, Speculator, Venture Capitalist, Novice and Gambler.

The theory also includes a model of the Stock Investing Information Process, which includes the
tasks: Idea Generation, Stock Selection, Company Research, Buy, Monitor and Sell. While
information practices are incredibly diverse in the early stages of the investment process, the
later stages tend to be more homogenous.

A core aspect of the theory is the concept of an Information Lens. Rather than using all
information sources and social networks at all times, investors look through an Information Lens,
seeing only a small subset of their information world at any particular time. The Information
Lens is highly dynamic and is shaped by the current Persona and the task at hand.

The bidirectional relationship between the investor and the information world is also considered.
The information environment itself can influence the investor and change their behaviour, by
enabling new strategies that were not previously possible, or potentially threatening the investor
with information overload. Online technologies can also enhance the investing experience and
make it more interesting and exciting.