The University of Southampton
University of Southampton Institutional Repository

Can graphical displays really improve the communication of financial risk information?

Can graphical displays really improve the communication of financial risk information?
Can graphical displays really improve the communication of financial risk information?
Insufficient understanding of financial risks can cause individuals to make poor financial decisions, and this can have substantial deleterious effects on their wealth, health and psychological well-being. Therefore, it is crucial to promote better engagement and comprehension of risk-related financial information.

While evidence shows that numerical information processing and comprehension are significantly influenced by presentation formats (e.g., graphical vs. textual formats), there is mixed evidence on the efficacy of the different formats. For example, some, but not all research shows that lay individuals who view textual-based formats develop a better comprehension of financial risk information than individuals who view graphical formats. However, none of the extant studies have explored why an individual’s comprehension of financial information might be hindered by graphical presentations or how such formats could be better designed to improve comprehension.

To address this knowledge gap, 40 participants were asked to process financial information presented using two types of graphical displays (i.e., risk of financial loss from stocks presented using icon arrays; mortgage repayment risks presented using text and bar charts). Think-aloud and think-after methods were employed to collect data on the participants’ levels of comprehension, cognitive processes, and judgments. Verbal protocol analysis revealed that graphical formats were more useful to communicate gist information (general risk impression) than the verbatim information (precise risk information). That is, graphical formats more effectively helped participants to make comparisons between different pieces of financial data and to quickly identify key information. However, in terms of generating deeper insights into financial risk, the results showed that more effortful graph interpretation was required by the participants and that this was most effective when supported by written text. Furthermore, our participants emphasized that textual information was their preferred format for receiving financial risk information. Participants reasoned that textual formats provided more precise information and were easier to interpret, and that the integrations and interpretations that were required to understand the graphical formats increased the likelihood of making errors. Moreover, our study found that although arresting colours appeared helpful in the information identification process, they also elicited disproportionate attentional weighting and emotional reactions. That is, red bars (cf. green bars) were viewed as a warning signal and this led to heightened concerns about risk. Similarly, black icons (cf. grey icons) increased the salience of financial losses, which then contributed to heightened risk awareness. These findings can be utilised to improve financial risk communications.
Risk communication, Graphical models, Finances, Risk perception, Judgment and decision making
Zhang, Danni
c81a5801-9c21-4c27-a340-45874b5274f9
Dawson, Ian
dff1b440-6c83-4354-92b6-04809460b01a
Sung, Ming-Chien
2114f823-bc7f-4306-a775-67aee413aa03
Ma, Tiejun
1f591849-f17c-4209-9f42-e6587b499bae
Zhang, Danni
c81a5801-9c21-4c27-a340-45874b5274f9
Dawson, Ian
dff1b440-6c83-4354-92b6-04809460b01a
Sung, Ming-Chien
2114f823-bc7f-4306-a775-67aee413aa03
Ma, Tiejun
1f591849-f17c-4209-9f42-e6587b499bae

Zhang, Danni, Dawson, Ian, Sung, Ming-Chien and Ma, Tiejun (2021) Can graphical displays really improve the communication of financial risk information? The 29th Annual Conference of the Society for Risk Analysis - Europe, Espoo, Finland., Aalto University, Espoo, Finland. 14 - 16 Jun 2021.

Record type: Conference or Workshop Item (Other)

Abstract

Insufficient understanding of financial risks can cause individuals to make poor financial decisions, and this can have substantial deleterious effects on their wealth, health and psychological well-being. Therefore, it is crucial to promote better engagement and comprehension of risk-related financial information.

While evidence shows that numerical information processing and comprehension are significantly influenced by presentation formats (e.g., graphical vs. textual formats), there is mixed evidence on the efficacy of the different formats. For example, some, but not all research shows that lay individuals who view textual-based formats develop a better comprehension of financial risk information than individuals who view graphical formats. However, none of the extant studies have explored why an individual’s comprehension of financial information might be hindered by graphical presentations or how such formats could be better designed to improve comprehension.

To address this knowledge gap, 40 participants were asked to process financial information presented using two types of graphical displays (i.e., risk of financial loss from stocks presented using icon arrays; mortgage repayment risks presented using text and bar charts). Think-aloud and think-after methods were employed to collect data on the participants’ levels of comprehension, cognitive processes, and judgments. Verbal protocol analysis revealed that graphical formats were more useful to communicate gist information (general risk impression) than the verbatim information (precise risk information). That is, graphical formats more effectively helped participants to make comparisons between different pieces of financial data and to quickly identify key information. However, in terms of generating deeper insights into financial risk, the results showed that more effortful graph interpretation was required by the participants and that this was most effective when supported by written text. Furthermore, our participants emphasized that textual information was their preferred format for receiving financial risk information. Participants reasoned that textual formats provided more precise information and were easier to interpret, and that the integrations and interpretations that were required to understand the graphical formats increased the likelihood of making errors. Moreover, our study found that although arresting colours appeared helpful in the information identification process, they also elicited disproportionate attentional weighting and emotional reactions. That is, red bars (cf. green bars) were viewed as a warning signal and this led to heightened concerns about risk. Similarly, black icons (cf. grey icons) increased the salience of financial losses, which then contributed to heightened risk awareness. These findings can be utilised to improve financial risk communications.

This record has no associated files available for download.

More information

Published date: 16 June 2021
Venue - Dates: The 29th Annual Conference of the Society for Risk Analysis - Europe, Espoo, Finland., Aalto University, Espoo, Finland, 2021-06-14 - 2021-06-16
Keywords: Risk communication, Graphical models, Finances, Risk perception, Judgment and decision making

Identifiers

Local EPrints ID: 450011
URI: http://eprints.soton.ac.uk/id/eprint/450011
PURE UUID: 696e24e0-8858-492b-9c6a-7827df080ee2
ORCID for Ian Dawson: ORCID iD orcid.org/0000-0003-0555-9682
ORCID for Ming-Chien Sung: ORCID iD orcid.org/0000-0002-2278-6185

Catalogue record

Date deposited: 05 Jul 2021 16:30
Last modified: 13 Dec 2021 03:07

Export record

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×