Improving index mutual fund risk perception: Increase financial literacy or communicate better?
Publication type
Journal articlePublication Year
2018Journal
Economic Notes - Review of Banking, Finance and Monetary EconomicsPublication Volume
47Publication Issue
2-3Publication Begin page
231Publication End page
552
Metadata
Show full item recordAbstract
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.Knowledge Domain/Industry
Accounting & FinanceSpecial Industries : Financial Services Management
ae974a485f413a2113503eed53cd6c53
10.1111/ecno.12112