Abstract
We experimentally examine whether consulting with other persons before making investment decisions can prevent elderly people from becoming victims of fraudulent investments. Elderly subjects are faced with deciding a hypothetical investment allocation between a fraudulent investment and an ordinary stock investment trust. The fraudulent investment’s principal is guaranteed and has a far higher expected return compared to the current financial market condition. Subjects are asked to decide two times for different combinations of the two products. We set up two treatment groups. One group is such that subjects have to consult with each other about investments before deciding the allocations, and the other group is such that subjects have to decide by themselves. We compare the investment allocations of the two groups. We find that, for the first decision, subjects who consult with each other have a higher allocation to the fraudulent investment. This suggests that consulting with families or other close relations may not help prevent elderly people from becoming victims of fraudulent investment. We also find that, for the second decision, investment allocation to fraudulent investment is less than that of the first decision for subjects who consult with each other. This suggests that experience may be important for effective consulting. It may be helpful to expose elderly people to the details of fraudulent investment technique in order to reduce the number of victims. It may be also useful to point out specific contents of consulting such as comparing current and past saving interest rates.
