To risk or not to risk? Improving financial risk-taking of older adults by online social information

Increasing number of older adults manage their retirement savings online. A crucial element of better management is to take rational financial risk – to strike a reasonable balance between expected gain and loss under uncertainty. With the emergence of Web 2.0 technologies, social trading networks can help individuals make better financial decisions by providing information about others’ actions. It is, however, unclear whether these resources is beneficial to older adult’s own financial decisions, especially because older adults are vulnerable to poor risk management. To address this question, we devise an experiment that improves upon an existing experimental economic task. We find that both peer information (detailed choices by a few individuals) and majority information (aggregated choices of the crowd) help older adults make more risk-neutral decisions. Furthermore, the combination of peer and majority information corrects more mistakes of more risk averse older adults.