The Less You Know, the More You Are Afraid of

Abstract (via wang, Keller, Siegrist @ Journal of Behavioral Finance)

We conducted a survey on risk perceptions of investment products in the German-speaking area of Switzerland. Unlike the typical two-factor structure documented in the previous literature, we found that knowledge-related scales were highly correlated with risk-related scales, whereas the correlation between perceived risk and historical risk measures was much lower. The respondents perceived those easier-to-understand products as less risky, which was likely driven by the familiarity bias. Our results are in line with the affect heuristic and risk-as-feelings hypotheses.

Click Here To Read: The Less You Know, the More You Are Afraid of—Risk Perceptions of Investment Products

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08. March 2011 by Miguel Barbosa
Categories: Behavioral Economics, Curated Readings | Leave a comment

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