Risk Perceptions and Financial Decision Making

Abstract

We examine whether training individuals about the riskiness of financial products changes their risk perception in making financial decisions. Conducting a nationwide survey in T & uuml;rkiye, we first map individuals' use of regulated and unregulated financial products in borrowing, saving, and investing. We next train a randomly selected sample of people in three regions where use of unregulated or risky products is high and test their financial preferences by asking them to take the survey after the training. With controls for observable characteristics, our results suggest that training on the riskiness of financial products helps improve individuals' risk perception, and this improvement seems to motivate them to prefer regulated financial products and to seeking professional advice about borrowing, saving, and investment.