nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2019‒02‒11
four papers chosen by

  1. Wealth, Financial Literacy and Behavioral Biases: Evidence from Japan By Shizuka Sekita; Vikas Kakkar; Masao Ogaki
  2. Financial Inclusion of Small and Medium-Sized Enterprises in the Middle East and Central Asia By Nicolas R Blancher; Maximiliano Appendino; Aidyn Bibolov; Armand Fouejieu; Jiawei Li; Anta Ndoye; Alexandra Panagiotakopoulou; Wei Shi; Tetyana Sydorenko
  3. Blockchain, FinTechs and their relevance for international financial institutions By Davradakis, Emmanouil; Santos, Ricardo
  4. The Applications of Graph Theory to Investing By Joseph Attia

  1. By: Shizuka Sekita (Kyoto Sangyo University, Graduate School, Division of Economics); Vikas Kakkar (City University of Hong Kong, Department of Economics and Finance); Masao Ogaki (Faculty of Economics, Keio University)
    Abstract: This paper considers the relationship between wealth, financial literacy and several other variables using data from Japan's first large-scale survey on financial literacy. Using an instrumental variables approach to account for possible endogeneity of financial literacy, we find that financial literacy has an economically large and positive impact on wealth accumulation. We also decompose financial literacy into 5 sub-categories and find that deposits literacy, risk literacy and debt literacy have significant impacts on wealth accumulation in Japan, whereas inflation literacy and insurance literacy do not. In addition to financial literacy, several variables suggested by behavioral economics, such as over-confidence, self-control, myopia and loss-aversion are also significant determinants of wealth.
    Keywords: Financial Literacy, Financial Education, Wealth Accumulation, Behavioral Biases, Retirement Preparation
    JEL: D12 D14 J26
    Date: 2018–12–26
  2. By: Nicolas R Blancher; Maximiliano Appendino; Aidyn Bibolov; Armand Fouejieu; Jiawei Li; Anta Ndoye; Alexandra Panagiotakopoulou; Wei Shi; Tetyana Sydorenko
    Abstract: The importance of financial inclusion is increasingly recognized by policymakers around the world. Small and medium-sized enterprise (SME) financial inclusion, in particular, is at the core of the economic diversification and growth challenges many countries are facing. In the Middle East and Central Asia (MENAP and CCA) regions, SMEs represent an important share of firms, but the regions lag most others in terms of SME access to financing.
    Keywords: Financial inclusion;Middle East and Central Asia;Business enterprises;Small and Medium Enterprises; Financial Inclusion; Middle East and Central Asia
  3. By: Davradakis, Emmanouil; Santos, Ricardo
    Abstract: The purpose of this working paper is to provide a primer on financial technology and on Blockchain, while shading light on the impact they may have on the financial industry. FinTechs, the financial technology and innovation that competes with traditional financial methods in the delivery of financial services, has the potential to improve the reach of financial services to the broader public and facilitate the creation of a credit record, especially in the developing world. Some Blockchain applications like cryptocurrencies, could be problematic as cryptocurrencies cannot substitute traditional money due to the high risk of debasement, luck of trust and high inefficiencies relating to the high cost in electricity and human effort required to clear cryptocurrency transactions. Cryptocurrencies' high volatility renders it a poor means of payment and store of value, while resembling a fraudulent investment operation. Yet, other Blockchain applications, like Blockchain securities, could facilitate the functioning of an International Financial Institutions (IFI) due to the volume of securities they issue as Blockchain securities enable an almost instantaneous trade confirmation, affirmation, allocation and settlement and reconciliations are superfluous releasing collateral to be used for other purposes in the market. IFIs could promote awareness and understanding about Blockchain technology among different IFI services and launch Blockchain labs in order to pilot projects that can improve governance and social outcomes in the developing world. Financial inclusion, at the core of IFI's mandate, could be enhanced by investing into FinTechs who facilitate access to payment systems. IFIs could also ponder the development of Blockchain software aimed at improving transparency and efficiency in public resources that finance development projects. IFIs could promote Blockchain applications in several sectors like agricultural lending where Blockchain technology is used in the supply chain in order to improve transparency and efficiency in agricultural and commodity production. Other sectors include transport and logistics and even energy distribution. IFIs could benefit by utilizing FinTechs' knowhow in the analysis of big data in order to understand better the investment gaps and the financing needs of prospective clients. Finally, FinTechs' knowhow could be used by IFIs in order to streamline their internal processes concerning credit underwriting and risk management.
    Date: 2019
  4. By: Joseph Attia
    Abstract: How can graph theory be applied to investing in the stock market? The answer may help investors realize the true risks of their investments, help prevent recessions like that of 2008, and increase financial literacy amongst students. Using several original Python programs, we take a correlation matrix with correlations between the stock prices and then transform that into a graphable binary adjacency matrix. From this graph, we take a graph in which each edge represents weak correlations between two stocks. Finding the largest complete graph will produce a diversified portfolio. Numerous trials have shown that diversified portfolios consistently outperform the market during times of economic stability, but undiversified portfolios prove to be riskier and more unpredictable, either producing huge profits or even larger losses. Furthermore, once deciding among which stocks our portfolio would consist of, how do we know when to invest in each stock to maximize profits? Can taking stock price data and shifting values help predict how a stock will perform today if another stock performs a certain way n days prior? It was found that this method of predicting the optimal time to investment failed to improve returns when based solely on correlations. Although a trial with random stocks with varied correlations produced more profits than continuously investing.
    Date: 2019–02

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NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.