The Two-System View of Cognition and Investor Choice: Evidence from Mutual Fund Launch Livestreams

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Zoom URL: https://uni-frankfurt.zoom-x.de/j/67101662674?pwd=lhtLNk9bz9ltHeOYCUeVtRsKFP7HYb.1
Meeting ID: 691 2153 6636
Password: 487285

Abstract:

This paper examines how investors’ effortless intuition (System 1) and deliberate reasoning
(System 2) jointly influence their investment decisions. We assemble a novel dataset of
livestream promotional events associated with the initial offerings of mutual funds in China
between 2020 and 2024, a setting in which no prior performance records or portfolio
disclosures are available, allowing us to isolate the effects of distinct cognitive processes. We
find that investors’ intuitive favorable responses to presenters’ dynamic emotional displays,
including vocal tone, facial expressiveness, and body movement, are positively and
significantly related to subsequent fund subscriptions. This effect attenuates when livestreams
convey (complex) information or feature fund managers, engaging investors’ analytical
processing and indicating that System 2 scrutiny can override System 1-driven impressions.
We further show that this overriding effect weakens when System 2 faces capacity constraints,
such as distraction from concurrent livestreams, distraction from extreme market returns, and
cognitive overload from long livestreams. Our novel evidence on the interaction of intuition
and reasoning in shaping investment choices provides a foundation for a richer positive theory
of investor behavior.