nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2020‒05‒04
three papers chosen by

  1. Confidence, Financial Literacy and Investment in Risky Assets: Evidence from the Survey of Consumer Finances By Andrej Cupák; Pirmin Fessler; Joanne W. Hsu; Piotr R. Paradowski
  2. Financial Education Affects Financial Knowledge and Downstream Behaviors By Tim Kaiser; Annamaria Lusardi; Lukas Menkhoff; Carly Urban
  3. Robo-Advising By Francesco D'Acunto; Alberto G. Rossi

  1. By: Andrej Cupák; Pirmin Fessler; Joanne W. Hsu; Piotr R. Paradowski
    Abstract: We employ recent Survey of Consumer Finances (SCF) microdata from the US to analyze the impacts of confidence in one’s own financial knowledge, confidence in the economy, and objective financial literacy on investment in risky financial assets (equity and bonds) on both the extensive and intensive margins. Controlling for a rich set of covariates including risk aversion, we find that objective financial literacy is positively related to investment in risky assets as well as debt securities. Moreover, confidence in own financial skills additionally increases the probability of holding risky assets and bonds. While these relationships are rather robust for the extensive margin, they break down with regard to the conditional share of financial wealth in risky assets of those who actually hold them. The relevance of financial literacy as well as confidence varies considerably with the distribution of wealth as well as across several socio-economic dimensions such as age, education and race.
    Keywords: Financial literacy; Confidence; Risky assets; Household finance; Survey data; Portfolio allocation
    JEL: D12 D14 D31 D91 G11 I20
    Date: 2020–01–16
  2. By: Tim Kaiser; Annamaria Lusardi; Lukas Menkhoff; Carly Urban
    Abstract: We study the rapidly growing literature on the causal effects of financial education programs in a meta-analysis of 76 randomized experiments with a total sample size of over 160,000 individuals. The evidence shows that financial education programs have, on average, positive causal treatment effects on financial knowledge and downstream financial behaviors. Treatment effects are economically meaningful in size, similar to those realized by educational interventions in other domains and are at least three times as large as the average effect documented in earlier work. These results are robust to the method used, restricting the sample to papers published in top economics journals, including only studies with adequate power, and accounting for publication selection bias in the literature. We conclude with a discussion of the cost-effectiveness of financial education interventions.
    Keywords: Financial education, financial literacy, financial behavior, RCT, meta- analysis
    JEL: D14 I21
    Date: 2020
  3. By: Francesco D'Acunto; Alberto G. Rossi
    Abstract: In this chapter, we first discuss the limitations of traditional financial advice, which led to the emergence of robo-advising. We then describe the main features of robo-advising and propose a taxonomy of robo-advisors based on four defining dimensions---personalization, discretion, involvement, and human interaction. Building on these premises, we delve into the theoretical and empirical evidence on the design and effects of robo-advisors on two major sets of financial decisions, that is, investment choices (for both short- or long-term horizons) and the allocation of financial resources between spending and saving. We conclude by elaborating on five broadly open issues in robo-advising, which beget theoretical and empirical research by scholars in economics, finance, psychology, law, philosophy, as well as regulators and industry practitioners.
    Keywords: FinTech, behavioral economics, algorithmic advice, A1, financial regulation, financial literacy
    JEL: D14 G21
    Date: 2020

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