Improving index mutual fund risk perception: Increase financial literacy or communicate better?
de Goeij, Peter Van Campenhout, Geert Subotic, Marjana
de Goeij, Peter
Van Campenhout, Geert
Subotic, Marjana
Citations
Altmetric:
Publication Type
Journal article
Editor
Supervisor
Publication Year
2018
Journal
Economic Notes - Review of Banking, Finance and Monetary Economics
Book
Publication Volume
47
Publication Issue
2-3
Publication Begin page
231
Publication End page
552
Publication Number of pages
Collections
Abstract
We investigate the effect of financial literacy and index mutual fund risk disclosure format on investors’ risk perception by examining the risk disclosure part in the Key Investor Information Document (KIID) for UCITS funds in Europe. Using an experimental survey administered to 244 university students we find that both financial literacy and the KIID risk representation affect investors’ risk level perception accuracy. In addition, we find indications that financial literacy is less important if the complexity of the risk decision framework is reduced, although in our samle this effect is weak. Our results indicate that as an alternative to efforts taken to stimulate financial literacy, policy makers can effectively impact investors’ risk assessment by presenting a risk indicator that simplifies the decision framework for all investors, irrespective of their level of financial literacy.
Research Projects
Organizational Units
Journal Issue
Keywords
Financial Literacy, Key Investor Information Document (KIID)