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Whom to Educate? Financial Fraud and Investor Awareness

Author

Listed:
  • 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
    Institute of Emerging Market Studies, The Hong Kong University of Science and Technology)

  • Xiaojian Zhao

    (Chinese University of Hong Kong (Shenzhen) and Hong Kong University of Science and Technology)

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.

Suggested Citation

  • Zhengqing Gui & Yangguang Huang & Xiaojian Zhao, 2018. "Whom to Educate? Financial Fraud and Investor Awareness," HKUST IEMS Working Paper Series 2018-52, HKUST Institute for Emerging Market Studies, revised Jan 2018.
    • Handle: RePEc:hku:wpaper:201852
    as

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    References listed on IDEAS

    as
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