Guest Contributor: Paper or Digital? For Investors, the Medium Matters
John Harrison, Executive Director of The Alternative and Direct Investment Securities Association (ADISA)
By: John Harrison, Executive Director of The Alternative and Direct Investment Securities Association (ADISA)
Recently, I finished up experimental research on risk tolerance and age. Specifically, I wanted to know whether there is a difference for a potential investor to examine financial material physically (i.e., on paper) or virtually (on a computer, tablet or smart phone screen).
To find answers to the questions about risk, age, and reading medium (screen or paper), my colleagues and I at Georgia State tested 212 persons, ranging from the ages of 18 to 69, with a fair mix of men and women. Their education levels varied, encompassing everything from high school graduates to doctoral recipients, with the median education level just shy of a four-year college degree. All were highly computer literate and computer savvy.
Half of the sample took the test on a computer screen, while half took the same test on paper. Unlike what we told the group, we were not concerned about their financial literacy, as much as we wanted to know about their levels of risk tolerance and trust, and questions measuring those two features were buried cleverly among the generic financial literacy scenarios. And, of course, we also wanted to know if the reading medium, paper or computer, made a difference.
Overall, the results confirmed a few things already known from years of research: As people get older, they are more risk-averse. This makes sense, as the closer individuals moves to retirement, the more they want to hold on to what they have.
Contrary to this, however, is that as people age, they become more trusting, for the most part. Previous research shows different results for non-financial trust vs. financial trust. Older people seem to be more trusting when it comes to non-financial issues, versus financial ones, though in our study, older subjects demonstrated more trust even with financial matters.
The results did reveal some surprises, however, the first of which was that the reading medium made no difference insofar as trust. Folks trust on computer, as much as they did on paper. However, when it came to risk, the reading medium made a huge difference. People presented as significantly riskier on screen, than on paper.
While this might appear to be an “age” thing (younger people are more glued to their screens than their older counterparts), our results showed that, across the board, and no matter the age, screen information equals riskier information and activities. Paper, on the other hand, seems to present less risky behaviors.
So, if you want to sell Tennessee beach front property, best to advertise in Facebook, not the printed Economist.
Since 2012, John Harrison has been the executive director of ADISA, an organization that represents the non-traded alternative investment industry. Harrison has been in association management for more than 25 years and has served in industry, education, and health associations in the U.S., Europe, and the Middle East. He was a cum laude graduate in biology and psychology from the University of Georgia, and earned an MBA and a doctorate in business administration from Georgia State University.
The views and opinions expressed in the preceding article are those of the author and do not necessarily reflect the views of The DI Wire.
