Polarization in Perceived Risk

Using customer data from a large fintech company offering “guaranteed” Euro certificates of deposits from various European banks, we document considerable heterogeneity in offered interest rates for the same maturity across and within countries for such a simple product. We find that 11% of investors regard these products as riskless – the Believers – and always go for the highest yield, but 67% – the Doubters – never do. Beliefs of Doubters are more persistent than beliefs of Believers. This suggests that the belief of full recovery of the deposit if there is a default diminishes over time for the average investor