The effect of fraud experience on investment behavior |
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| Institution: | 1. School of Economics, College of Management Academic Studies, Israel;2. Asper School of Business, University of Manitoba, Canada;3. Southwestern University of Finance and Economics, China;1. Latin American Reserve Fund, Bogotá, Colombia;2. Department of Finance, Information Systems, and Economics, City University of New York – Lehman College, Bronx, NY, USA;3. (Summer School), Escuela Internacional de Ciencias Económicas y Administrativas, Universidad de La Sabana, Chía, Colombia;4. Faculty of Economics and Business, Universitat Oberta de Catalunya, Barcelona, Spain;5. Faculty of Economics and Business, Universitat de Barcelona, Barcelona, Spain;1. School of Economics and Business Administration, Chongqing University, China;2. Business School, Soochow University, China;1. Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu, China;2. Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu, China;3. Research Institute of Economics and Management, Collaborative Innovation Center of Financial Security, Southwestern University of Finance and Economics, Chengdu, China;1. School of Accounting, Zhongnan University of Economics and Law, 182 Nanhu Avenue, Wuhan 430073, China;2. School of Business, George Mason University, Enterprise Hall 328, 4400 University Drive, Fairfax, VA 22030, USA;3. School of Economics, Huazhong University of Science and Technology, Luoyu Road 1037, Wuhan 430074, China;1. FERDI (Foundation for the Studies and Research on International Development), 63, Bd François Mitterrand, 63000 Clermont-Ferrand, France;2. CERDI - Université Clermont Auvergne - CNRS - IRD, F-63000 Clermont Ferrand, France |
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| Abstract: | Given the recent increases in fraud targeted at households, we examine the effect of household-level fraud experience on investment behavior for a representative sample of Chinese households. Using a difference-in-differences approach with matching, we find that households exposed to fraud are less likely to invest in high-risk assets such as stocks and derivatives and allocate less of their portfolio to high-risk assets. We find that the relationship between fraud experience and investment behavior is driven by households with high risk aversion and not low trust. |
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