From Victim to Risk-Taker: The Impact of Fraud Victimization on Extremely High-Risk Investment Behavior
Yusen Lei, Hao Lu, Yujing Zhang, Longyao Zhang · Emerging Markets Finance and Trade · 2026
In recent years, fraud has imposed substantial losses on households and altered their financial decision-making. Using data from the China Household Finance Survey, this study shows that households that suffered fraud-related financial losses are significantly more likely to engage in extremely high-risk investment behavior. Mechanism analysis indicates that risk tolerance is the channel through which fraud influences such behavior. This effect is stronger among households with low financial literacy, limited economic resilience, and weak community support. These findings provide new evidence on how fraud reshapes household portfolio choices and suggest policy measures to mitigate its long-term economic consequences.