The effects of multimedia-induced affective states on recall and decision-making by individual investors

Kida et al. [Account., Organ., Soc. 23 (1998) 451.] found that affective reactions to financial data are easier to recall than the data itself, and that memories for numerical data are often reconstructed to match affective responses. They also demonstrated that investment decisions are influenced by affective responses to financial data. Given that multimedia has become an integral component of financial disclosures, and that multimedia is known to create affective responses, potential exists for multimedia presented in conjunction with financial data to alter recall patterns and influence decision-making. This study involves two experiments where subjects analyze financial data and affective states are manipulated with multimedia presentations peripherally related to the financial data. In the first study, memory reconstruction patterns of subjects receiving multimedia that induces either a positive or negative affective state are compared. The second study investigates the effects of media-induced moods on investment decisions, where a negative or positive affective state is induced with multimedia during analysis of one company, and no affective state is induced during subsequent evaluation of alternative companies. The principal findings from this research are: (1) Multimedia presented in conjunction with financial data can cause users to reconstruct memories to match the affective responses to the multimedia; (2) Multimedia-induced affective responses influence investment decisions; and (3) The recall and decision-making of individual investors with a high need for cognition are not influenced to the same extent by multimedia as the recall and decision-making of investors with a low need for cognition.