Risk communication and investment decisions: An experimental analysis
DOI:
https://doi.org/10.13133/2037-3651/17735Keywords:
Risk attitudes, risk representation, laboratory experimentAbstract
Can the way in which risky investments are presented affect the decisions of investors? This paper shows the results of an experiment in which participants face a sequence of portfolio decisions consisting in allocating an endowment between a risk-free and a risky asset presented in different “visual” modes: histogram, tree and with words. The data collected point out that the adopted representation mode for the risky asset affects the choices of participants. In particular, participants exhibit a lower risk aversion when the risky asset is presented in a more familiar (preferred) mode.
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