What makes a Chart Risky? An analysis on characteristics of financial charts and perceived risk perception using survey data

Abstract

This paper investigates experimentally which characteristics of a financial chart make it being perceived as risky. Based on behavioral finance literature, the authors constructs eleven explanatory variables that could explain the risk perception of respondents. Demonstrated is that respondents, if asked to judge a chart on its riskiness, are mostly influenced by the end point and the range of the respective chart. The standard deviation of a chart seems to play a less salient role, in contrast with findings of standard financial theory. There were found no demographical differences based on sex, age or education in rating the charts.