Mullett, T. L., Smart, L., & Stewart, N. (2018). The effect of risk warning content for contract for difference products. Available at SSRN: https://ssrn.com/abstract=3231616

A behavioural study was performed using adult internet users in the UK. Subjects answered questions about Contract For Difference products that tested their understanding of the risks associated with these products, and also their personal perceptions of the products. Subjects answered these questions before and after seeing and rating a fictional CFD product. This CFD product was presented in the form of a social media style advert, followed by a web page. The risk warnings presented with the tweet and the web page were either representative of the existing risk warnings, or were new, proposed versions. It was found that on 2 out of 3 measures of risk understanding the proposed web page warning significantly improved individuals’ accuracy, whilst on the third there was no difference between the effect of the existing and proposed risk warnings. For tweet risk warnings, there was no significant difference between the existing and proposed warnings on 2 out of 3 measures. On the third, the proposed warning increased accuracy, but the results suggest that it provides no benefit over only changing the webpage risk warning, with either the proposed tweet or proposed webpage warning being sufficient to provide increased understanding.

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