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Whom to Educate? Financial Fraud and Investor Awareness

Zhengqing Gui, Yangguang Huang and Xiaojian Zhao
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Zhengqing Gui: Department of Economics , The Hong Kong University of Science and Technology
Yangguang Huang: Department of Economics , The Hong Kong University of Science and Technology

No 2018-52, HKUST IEMS Working Paper Series from HKUST Institute for Emerging Market Studies

Abstract: We study how investors are exploited by fraudulent financial products. These investors purchase financial products that are inconsistent with their risk attitudes, and in turn, their behaviors provide an incentive for firms to commit financial fraud. We then conduct experiments and surveys in Shenzhen, China to measure investors' risk preferences and the effect of an eye-opening financial education program. Participating in our education program significantly reduces investors' tendency to invest in fraudulent products, especially among those who are risk-averse. Therefore, compared to randomly assigning the education program to investors, targeting risk-averse investors will be more effective in fighting financial fraud.

Pages: 37 pages
Date: 2018-01, Revised 2018-01
New Economics Papers: this item is included in nep-edu, nep-fle and nep-upt
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https://iems.ust.hk/assets/publications/working-papers-2018/iemswp2018-52-v2.pdf First version, 2018 (application/pdf)

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