Experimental Design Details
First, at the outset of the experiment, participants will perform a simple financial literacy questionnaire.
This questionnaire consists of "Big Three" Financial literacy questions. In the same page, participants are also asked to think of an event related to the stock market and indicate what feelings it suggest to the participant.
Following this, participants will be randomly assigned to an experimental condition.
Condition I: participants are given the following information: "What are the chances that a financial instrument increases or decreases in price over time? A financial asset can increase, stay constant, or decrease in price. In particular, each possibility is not necessarily equally likely. For instance, for one specific asset it could be more likely that it increases in price, or vice versa."
Condition II: participants are given the following information: "What are the chances that a financial instrument increases or decreases in price over time? A financial asset can increase, stay constant, or decrease in price. In particular, each possibility is not necessarily equally likely. For instance, for one specific asset it could be more likely that it increases in price, or vice versa." + stock-specific information on past performance of the asset.
Condition III: participants are given the following information: "The change of prices of financial instruments over time is like sports results. Some prices are more likely to go up in the same way football teams are more likely to win matches. Consider the football match between Manchester City and Leeds. It is considered more likely that Manchester City wins the match compared to the probability that Leeds wins it."
Note that the example of the football match may change.
Condition IV: participants are given the following information: "When a financial instrument promises a higher return, also the associated risk of losing the money invested is higher. This is called the risk-return tradeoff. Because of this, in finance, it is said that there are no easy earnings. We need to take into account this concept when making financial decisions."
Condition V: no information.
After this, participants are given the current price of a specific stock (stock S, price P) and are asked to assess the probability with which they think that the stock will increase in price by X (P+X), will decrease in price by Y (P-Y), or will stay in the price range [P-Y;P+X] after 14 days. This elicitation is payoff relevant and is incentivized following Karni (2009).
Thus, participants will be given an amount of money and are asked what percentage of it they want to keep and how much they want to invest in stock S. They win 2.5 times the amount invested if the price of the S after 14 days is above a given price PI. Otherwise, they lose the investment.
The next page of the experiment will ask participants how confident they are about their beliefs about the stock S price in the future, and that the amount invested in the stock will yield a positive return. Also, for those participants in conditions I-II-III-IV, we will ask them whether they consider the information provided to them prior the investment decision useful or not.
The last part of the experiment consisted of measuring ambiguity attitudes towards the same stock S following Baillon et al. (2018) elicitation method. This part might be also elicited on a separate sample, right after participants receive the information treatment.