Cognitive abilities and portfolio choice

Christelis, Dimitris; Jappelli, Tullio; Padula, Mario

doi:10.1016/j.euroecorev.2009.04.001

Cited by 733 publications

(284 citation statements)

References 45 publications

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“…Hastings et al (2013) document that respondents with higher cognitive abilities and more comfortable with numerical calculations on average exhibit higher levels of financial literacy. They also review a number of studies which find a positive relationship between cognitive abilities and numeracy on the one hand and sound financial behavior on the other hand (e.g., Banks and Oldfield 2007;Grinblatt et al 2009;Christelis et al 2010). Thus, Hung et al (2009) argue that, for designing effective programs to improve financial literacy, it is important to differentiate general cognitive abilities from core aspects of financial literacy.…”

Section: Cognitive Abilities Versus Financial Literacymentioning

confidence: 99%

Financial literacy, financial advice, and financial behavior

2017

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In this survey, we review the voluminous body of literature on the measurement and the determinants of financial literacy. Wherever possible, we supplement existing findings with recent descriptive evidence of German households' financial literacy levels based on the novel Panel on Household Finances dataset, a large-scale survey administered by the Deutsche Bundesbank and representative of the financial situation of households in Germany. Prior research not only documents generally low levels of financial literacy but also finds large heterogeneity in financial literacy across the population, suggesting that economically vulnerable groups are placed at further disadvantage by their lack of financial knowledge. In addition, we assess the literature evaluating financial education as a means to improve financial literacy and financial behavior. Our survey suggests that the evidence with respect to the effectiveness of the programs is rather disappointing. We also review the role of individuals' financial literacy for the use of professional financial advice and assess whether expert intervention can serve as a substitute to financial literacy. We conclude by discussing several directions for future research.

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Section: Cognitive Abilities Versus Financial Literacymentioning

confidence: 99%

Financial literacy, financial advice, and financial behavior

2017

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“…Hilgert et al (2003) showed a strong correlation between financial literacy and everyday financial management. Studies have found that individuals with greater financial literacy tend to participate more in financial markets (e.g., Christelis et al 2010;Van Rooij et al 2011a). Van Rooij et al (2011b) also showed that numeracy is related to successful retirement planning.…”

Section: <>mentioning

confidence: 99%

The Relationship Between Personal Financial Wellness and Financial Wellbeing: A Structural Equation Modelling Approach

2013

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In this study we examined the construct of financial wellness and its relationship to personal wellbeing, with a focus on the role of financial literacy. We made gender comparisons using a structural equation modeling analysis with variables that measured personal wellbeing, financial satisfaction, financial status, financial behavior, financial attitude, and financial knowledge. The research indicates that males ranked higher in financial satisfaction and financial knowledge than females; on the other hand, females ranked higher in personal wellbeing than males. The model of financial wellness proposed by Joo (2008) was operationalized to examine three alternative structural models. The model that best fitted the data was the one where financial wellness was conceived as a set of relations between variables. The relationship of all the variables to personal wellbeing was mediated by financial satisfaction, with some gender differences: In females the main source of financial satisfaction was financial status; in males it was financial knowledge.

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“…Much of this evidence is discussed in the introduction. Additional evidence includes Christelis, Jappelli, and Padula (2010), who show that direct stock holdings are positively related to cognitive ability. Polkovnichenko (2005) shows that the fraction of households' total financial wealth invested in stocks directly is negatively related to the number of household dependents and the household head's level of risk aversion, and positively related to education.…”

Section: Motivationmentioning

confidence: 99%

“…Direct stock ownership has be documented in a variety of data sources, including European tax and survey data (Calvet, Campbell, and Sodini (2007); Massa and Simonov (2006); Christelis, Jappelli, and Padula (2010)), U.S. survey data ; Kelly (1995); Polkovnichenko (2005)), and U.S. brokerage data (Barber and Odean (2000b); Goetzmann and Kumar (2008)), among others. This paper investigates a simple and intuitive explanation for the prevalence of household direct stock ownership: households believe the stocks they own will outperform a more diversified alternative.…”

Section: Introductionmentioning

confidence: 99%

The Costs and Beliefs Implied by Direct Stock Ownership

Barth

2018

Management Science

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This paper develops a structural model of the costs and beliefs required to rationalize household direct stock ownership. In the model, households believe they can learn information about individual stock returns through costly research. The model provides a novel explanation for many empirical features of household portfolios. Further, the model identifies the distributions of both household research costs and household beliefs about the predictability of individual stock returns. Identification depends only on households' wealth and portfolio choices. Parameter estimates suggest that most households have modest beliefs about the benefits of individual stock research, although a minority must expect extraordinary returns.JEL Classifications: G02, G11

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Cognitive abilities and portfolio choice

Cited by 733 publications

References 45 publications

Financial literacy, financial advice, and financial behavior

Financial literacy, financial advice, and financial behavior

The Relationship Between Personal Financial Wellness and Financial Wellbeing: A Structural Equation Modelling Approach

The Costs and Beliefs Implied by Direct Stock Ownership

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