Attention and Effort in an Investment Decision under the Influence of Gains and Losses

I use multimodal physiological measurements to examine changes in investor behavior over a series of gains and losses. Specifically, I examine what information more- or less-sophisticated investors emphasize and characteristics of their associated effort over a series of decision rounds as they choose whether to take a long or short position in a stock. Using eye tracking, I measure where attention is directed. Using GSR, pupillometry, and EEG data, I measure characteristics of the effort expended by investors as they evaluate the information available to them. I find that investors emphasize information that trends in the same direction as the decision they ultimately make. Additionally, overall effort levels are greater when investors make investment decisions under the influence of prior losses. I also document evidence that suggests the magnitude of a participant's change in effort is greater when they go from experiencing gains to losses than from losses to gains. I provide new insight into the process of investment decision-making and how framing and experience impact that process. This dissertation is one of the first examples in the accounting and finance literatures to make extensive use of eye tracking and introduces the use of GSR, pupillometry, and EEG measurements in investment decision-making research.