Measurement Scales on Investment Decision-making. Empirical Evidence Based on MiFID Questionnaires.

Abstract

The MiFID European directive regulates the provisions of investment services and improves the protection of retail investors. To know the financial knowledge and experience of investors, this directive uses basically two types of questionnaires: appropriateness and suitability tests in which are employed different measurement scales. Since some sub-fields of Behavioral Finance are focused on the study of perception biases, the main objective of this paper is to analyze some advantages and drawbacks of numerical and verbal rating scales, and to examine their effects on investors’ perceptions. To do that, it was carried out an empirical study based on different measurement scales: verbal, numerical rating scale, and verbal scale considering proximities. In this contribution, the concept of ordinal proximity measure is employed to collect the individuals’ perceptions about ordinal scales.