nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2020‒11‒16
three papers chosen by

  1. Does Financial Literacy Influence Use of Mobile Financial Services in Malawi? Evidence from Malawi Household Survey Data By Mirriam Muhome Matita; Takondwa Chauma
  2. Financial Literacy and Intertemporal Arbitrage By Oberrauch, Luis; Kaiser, Tim
  3. Risk Preferences and Efficiency of Household Portfolios By Agostino Capponi; Zhaoyu Zhang

  1. By: Mirriam Muhome Matita; Takondwa Chauma (Lilongwe University of Agriculture and Natural Resources, Malawi)
    Abstract: Mobile financial services are gaining prominence and could be a possible avenue for fast-tracking financial inclusion in developing countries, including Malawi. However, adoption and usage of such services remains low among the Malawi population. This study investigates the influence of financial literacy on financial behaviour of individuals in Malawi, specifically use of mobile phone-based financial transactions. Descriptive and econometric analyses were conducted using cross-sectional data obtained from the Reserve Bank of Malawi. Findings reveal that the likelihood of using mobile financial services increases with increasing levels of financial literacy, type of employment and peri-urban residence. Furthermore, men are more likely to transact on mobile phones than females and that although income levels matter in the use of mobile financial transactions, the magnitude of effect is negligible. Results suggest opportunities for expanding access to financial services and products such as differentiation in financial literacy education by characteristics of population including gender of users. Informal settings do not preclude expansion of digital payments, and therefore financial product innovation and addressing rural resident’s constraints to access mobile financial services is crucial.
    Date: 2019
  2. By: Oberrauch, Luis; Kaiser, Tim
    Abstract: We study the role of financial literacy for inter-temporal decision-making using an adapted version of the Convex Time Budget Protocol (Andreoni and Sprenger 2012). While we find no evidence of dynamically inconsistent preferences in the aggregate, we document substantial heterogeneity in choice-patterns and estimated parameters at the individual-level: We find that subjects with higher levels of financial literacy are more likely to make patient inter-temporal choices, to allocate the entire budget to a single payment-date, allocate the entire budget to corner choices as interest rates increase, and to show individual discount factors which are in line with extra-experimental market rates. At the same time, financial literacy is uncorrelated with choice consistency and estimated individual error parameters. These results serve as suggestive evidence for inter-temporal arbitrage among financially literate respondents, thereby revealing a potential confound in time-preference elicitation tasks relying on time-dated monetary rewards.
    Keywords: Intertemporal choice,financial literacy,narrow bracketing,arbitrage
    JEL: D91
    Date: 2020
  3. By: Agostino Capponi; Zhaoyu Zhang
    Abstract: We propose a novel approach to infer investors' risk preferences from their portfolio choices, and then use the implied risk preferences to measure the efficiency of investment portfolios. We analyze a dataset spanning a period of six years, consisting of end of month stock trading records, along with investors' demographic information and self-assessed financial knowledge. Unlike estimates of risk aversion based on the share of risky assets, our statistical analysis suggests that the implied risk aversion coefficient of an investor increases with her wealth and financial literacy. Portfolio diversification, Sharpe ratio, and expected portfolio returns correlate positively with the efficiency of the portfolio, whereas a higher standard deviation reduces the efficiency of the portfolio. We find that affluent and financially educated investors as well as those holding retirement related accounts hold more efficient portfolios.
    Date: 2020–10

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