Graphical Information and Risk Perception: The Effect of Price Charts and Return Bar Charts on Financial Risk Perception
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2021-11-05
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en
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Abstract
The existing literature shows that individuals are systematically influenced by the characteristics of price charts displaying the past performance of an asset. It appears that the shape of a price path exhibited in the price chart affects risk perception and, ultimately, financial investment decisions. In this study, the effect of differently shaped price paths in combination with return bar charts has been analyzed to find out to what extent the provision of additional investment information affects perceived risk on the part of (retail) financial investors. An experimental survey shows that different price path elements, such as ending point, salience of peak (trough), turning point, and price trend, all significantly affect the risk perception. The inclusion of supplementary return bar charts causes significant changes to risk perception when controlling for financial knowledge. This research contributes a more holistic perspective on a wide range of risk perception studies as it considers additional information sources that could be used by (retail) financial investors to assess their financial investments.
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Faculteit der Managementwetenschappen