Abstract: The growing popularity of crypto assets has driven increased engagement, often fuelled by promotional content that highlights past returns while downplaying risks. This paper evaluates the effectiveness of behaviourally informed risk warnings in such a setting. Using an online randomized controlled trial, participants viewed simulated investment promotions for two financial products: stocks and crypto assets. Treatments combined behaviorally informed risk warnings with past return information, the same information but with returns shown before warnings, or risk warnings paired with price volatility cues. The first treatment significantly improved risk comprehension and perception by 5% and 4%. These effects are further magnified by the order in which information is presented and by increasing the salience of risk information. Showing risk warnings after potential returns increases risk comprehension by 12% and risk perception by 6%, suggesting evidence in favor of recency bias. Similarly, showing risk warnings and price volatility cues improves risk comprehension by 10% and risk perception by 7%, reflecting the effect of heightened risk salience. These effects are driven by at-risk investors, defined as individuals who follow crypto market updates on social media but have not yet invested in crypto assets. In line with prior evidence, we find no effect among those who have previously invested in crypto assets, likely because their decisions are shaped more by past investment outcomes than by ex-ante warnings.
