Perception of verbal risk labels in financial contexts

Trial Information

General Information

Title

RCT ID

AEARCTR-0017666

Initial registration date

January 20, 2026

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

January 22, 2026, 2:00 PM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country

Germany

Region

Country

United States of America

Region

Primary Investigator

Name

Christoph Becker

Affiliation

Heidelberg University

Contact Primary Investigator

Other Primary Investigator(s)

PI Name

Stefan T. Trautmann

PI Affiliation

Heidelberg University

PI Name

Sonja Drick

PI Affiliation

Heidelberg University

Additional Trial Information

Status

In development

Start date

2026-02-01

End date

2026-02-08

Keywords

Behavior

Additional Keywords

Risk labels, risk perception, survey

JEL code(s)

C83, D81, D84

Secondary IDs

Prior work

This trial does not extend or rely on any prior RCTs.

Abstract

Individuals investing their savings need to decide how risky a portfolio they want to hold. Riskier portfolios offer higher expected returns but are also more volatile, a trade-off that is important to keep in mind when planning to withdraw funds at a specific point in time. These considerations become especially relevant in old age, when accumulated savings need to be transformed into a steady stream of income. Information on financial products, such as Key Information Documents (KIDs), often communicate risks using verbal categories (e.g. “very conservative” or “very risky”) for different ranges of risk. Effective communication requires a shared understanding of these labels between investors and financial institutions. In this explorative study we test which ranges of risk individuals associate with different verbal risk categories. Participants are part of one of two possible treatments: The first treatment uses a scale with 5 categories, which correspond to the share of equity in a portfolio. The scale in the second treatment has 7 risk categories reflecting the chance of premature depletion of retirement savings. We further analyze how this assessment relates to participants’ risk attitudes.

External Link(s)

Registration Citation

Citation

Becker, Christoph, Sonja Drick and Stefan T. Trautmann. 2026. "Perception of verbal risk labels in financial contexts." AEA RCT Registry. January 22. https://doi.org/10.1257/rct.17666-1.0

Sponsors & Partners

Experimental Details

Interventions

Intervention(s)

Eliciting risk perceptions using a scale with adjustable verbal categories covering different ranges of risk.

Intervention (Hidden)

Intervention Start Date

2026-02-01

Intervention End Date

2026-02-08

Primary Outcomes

Primary Outcomes (end points)

(i) Perceived range of equity share within a portfolio corresponding to a given risk label.
(ii) Perceived range of risk corresponding to a given risk label.

Primary Outcomes (explanation)

(i) Participants are tasked to resize 5 risk categories on a scale from 0 to 100%. The risk reflects the share of equity within a portfolio. The labels are sorted from “Very Conservative” to “Aggressive Growth”.
(ii) Participants are tasked to resize 7 risk categories on a scale from 0 to 100%. The risk reflects the chance of premature depletion of retirement savings. The labels are sorted from “Extremely unlikely” to “Extremely likely”.

Secondary Outcomes

Secondary Outcomes (end points)

(i) Financial participation
(ii) Confidence
(iii) Risk tolerance
(iv) Cognitive reflection test (CRT)
(v) Financial literacy
(vi) Demographics (age, gender, education, income)

Secondary Outcomes (explanation)

(i) Binary question
(ii) Self-rating of financial knowledge, 6-item Likert scale
(iii) Risk attitude question from Dohmen et al. (2011)
(iv) 3 altered items from the CRT (Baron et al. 2015)
(v) 3 items: Breakeven question from CRT, 2 items from the Advanced Literacy Questions (Rooja et al.)
(vi) Answers will be used as control variables.

Experimental Design

Participants in the survey are asked which ranges of risk (e.g. 0% to 10%) they associate with a given risk category (e.g. “very conservative”). In both treatments, participants do this using a scale from 0% to 100%. This scale is prefilled with different verbal risk labels (e.g. “very Conservative” to “very aggressive”). Before starting the main task, participants are asked a set of comprehension questions that test their understanding of how the scale tool works.

In the main task, participants are presented with one of two possible scenarios: In the first treatment, they are asked to label a portfolio corresponding to the share of equity within it. The second treatment asks about the perceived risk of prematurely depleting retirement savings. Participants are randomly presented with one of these two treatments.

After the main task, participants answer a set of demographic questions. Participants are recruited from a representative US sample and earn a flat payment of Pound 1.50 for their participation.

Experimental Design Details

Participants in the survey are asked which ranges of risk (e.g. 0% to 10%) they associate with a given risk category (e.g. “very conservative”). In both treatments, participants do this using a scale from 0% to 100%. This scale is prefilled with different verbal risk labels (e.g. “very Conservative” to “very aggressive”). In the beginning, all risk categories have the same size, participants are then asked to resize the categories (via drag and drop) such that they cover the range of risk they consider appropriate for a given category.

Before starting the main task, participants are asked a set of comprehension questions that test their understanding of how the scale tool works. They also get the chance to test the tool beforehand. If participants fail to answer one or more of the comprehension questions incorrectly, they get a chance to adjust their answers (they also always have the option to reread the instructions while working on the comprehension questions). Failing to answer one or multiple questions for a second time excludes the participant from further taking part in the experiment.

In the main task, participants are presented with one of two possible scenarios: In the first treatment, they are asked to label a portfolio corresponding to the share of equity within it. The scale has 5 categories covering “very Conservative” to “very aggressive”. The second treatment asks about the perceived risk of prematurely depleting retirement savings. The scale has 7 categories from “Extremely unlikely” to “Extremely likely”. Participants are randomly presented with one of these two treatments.

After the main task, participants answer a set of demographic questions including questions on their financial market participation, confidence in their financial knowledge, risk tolerance (based on Dohmen et al. 2011), a modified version of the basic three cognitive reflection test questions (from Baron et al. 2015), three questions on financial literacy, as well as basic demographics (age, gender, education, and income).

Participants are recruited from a representative US sample and earn a flat payment of Pound 1.50 for their participation.

Randomization Method

Two treatments, treatments are alternated between participants, participants enter study independently.

Randomization Unit

Individual

Was the treatment clustered?

No

Experiment Characteristics

Sample size: planned number of clusters

None

Sample size: planned number of observations

1000 Prolific participants

Sample size (or number of clusters) by treatment arms

500 participants per treatment

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

None, Experiment is exploratory.

Supporting Documents and Materials

IRB

Institutional Review Boards (IRBs)

IRB Name

IRB of the Faculty of Economics and Social Sciences at Heidelberg University

IRB Approval Date

2026-01-12

IRB Approval Number

FESS-HD-2026-001

Analysis Plan

Perception of verbal risk labels in financial contexts

Pre-Trial

General Information

Locations

Primary Investigator

Other Primary Investigator(s)

Additional Trial Information

Registration Citation

Interventions

Primary Outcomes

Secondary Outcomes

Experimental Design

Experiment Characteristics

Institutional Review Boards (IRBs)

Post-Trial

Study Withdrawal

Intervention

Data Publication

Program Files

Relevant Paper(s)

Reports & Other Materials