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| Author: | Rooij, M. van Lusardi, A. Alessie, R. |
| Title: | Financial literacy and stock market participation |
| Journal: | Journal of Financial Economics
2011 : AUG, VOL. 101:2, p. 449-472 |
| Index terms: | Netherlands stock markets participation consumer choice portfolio selection risk management learning savings knowledge |
| Freeterms: | financial information |
| Language: | eng |
| Abstract: | Two special modules have been devised for De Nederlandsche Bank (DNB) Household Survey to measure financial literacy and evaluate its connection to stock market participation. It is found that the majority of respondents have basic financial knowledge and some grasp of concepts such as interest compounding, inflation, and the time value of money. However, very few are acquainted with anything beyond these basic concepts; many respondents do not know how bonds and stocks differ, how bond prices and interest rates are connected, and how risk can be diversified even in a basic level. Most importantly, it is found that financial literacy has an effect on financial decision-making: People with low literacy are much less likely to invest in stocks. |
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