The less you know, the more you are afraid of? A survey on risk perception of investment products

Correlation Analysis:

Demographic Variations:

Income Level Impact:

Investment Product Specifics:

4. 
   Discussion and Conclusion:
   

This study explores various factors that contribute to the fear associated with limited knowledge in investment decision-making. Firstly, cognitive biases play a significant role. Investors with limited knowledge may selectively seek information that confirms their existing fears, leading to an overestimation of risks.

Moreover, overconfidence bias plays a part, as those with limited knowledge might assume they have a comprehensive understanding of potential risks, thus fueling their fear-based perceptions.

Information asymmetry is another factor that influences risk perceptions. While the statement implies that fear arises from a lack of knowledge, it overlooks situations where investors may have incomplete or misleading information, leading to inaccurate risk perceptions.

Loss aversion, a well-known emotional bias, also affects investors with limited knowledge. They tend to be more averse to potential losses, intensifying their fear even when risks are objectively moderate. Additionally, temporal discounting influences risk perception, as individuals with less knowledge prioritize short-term fears over long-term benefits.

Fear of regret, a psychological factor, influences decision-making. Those with limited knowledge might be more fearful of making investment decisions they later regret, ultimately leading to suboptimal choices.

To gather data for this study, a structured questionnaire was developed. Preliminary results of the study indicate a correlation between participants' investment knowledge levels and their perceived risk. Participants with limited investment knowledge tend to express heightened concerns about the risks associated with various investment products. Demographic factors, such as age, income, and investment experience, will be further analyzed to identify potential influencing variables.

The correlation analysis revealed a negative correlation between participants' familiarity with investment products and their perceived risk levels. This suggests that as familiarity increases, perceived risk tends to decrease. Furthermore, age group analysis highlighted the impact of age on the relationship between knowledge and risk perceptions. Participants aged 18-25 exhibited a higher correlation between knowledge and risk perceptions compared to other age groups. Moreover, income level impact showed that participants with lower income levels demonstrated a more pronounced fear of potential losses, indicating a correlation between income and risk aversion.

When comparing specific investment products, participants with limited knowledge expressed higher perceived risks associated with stock investments compared to mutual funds.