nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2023‒01‒02
four papers chosen by
Viviana Di Giovinazzo
Università degli Studi di Milano-Bicocca

  1. Financial Literacy is associated with Stock Market Expectations but not with Forecast Accuracy: Evidence from Germany By Buschong, René
  2. Attitude towards financial planning of Italian households By Marianna Brunetti; Rocco Ciciretti; Nadia Linciano; Monica Gentile; Paola Soccorso
  3. Are Retirement Planning Tools Substitutes or Complements to Financial Capability? By Gopi Shah Goda; Matthew R. Levy; Colleen Flaherty Manchester; Aaron Sojourner; Joshua Tasoff; Jiusi Xiao
  4. How Shocks Affect Stock Market Participation By Lorenz Meister; Karla Schulze

  1. By: Buschong, René
    Abstract: Using a representative panel dataset, this study focuses on stock market expectations as well as the accuracy of forecasts made by private households in Germany. First, I find evidence that higher financial literacy is associated with lower stock market expectations. However, there is no evidence that financial literacy is associated with the accuracy of forecasts. Second, the findings suggest that individuals form their expectations based on past performance: The three-month stock market return prior to being surveyed is associated with stated expectations and this association is heterogenous by financial literacy levels.
    Keywords: financial literacy,stock market expectations,forecast error,stock market participation
    JEL: G53 G41 G51
    Date: 2022
  2. By: Marianna Brunetti; Rocco Ciciretti; Nadia Linciano; Monica Gentile; Paola Soccorso
    Abstract: Employing structured financial planning to manage personal finances on is associ-ated with higher levels of financial well-being and increased ability to react to shocks. There-fore, it is important to understand the factors associated with the propensity to plan and what it is that promotes financial planning. Our empirical evidence for a sample of Italian households shows a poor inclination for financial planning. CONSOB Survey data on the fi-nancial investments made by of Italian household (or FIIH) are used to estimate a probit model which shows a positive association between financial planning and financial knowledge, and the relevance of personal traits such as financial anxiety and financial self-efficacy, financial control (control over savings, spending and indebtedness) and financial conditions. The findings provide useful insights for financial decision-makers in the context of financial education initiatives and client-intermediary relationship aimed at promoting appropriate attitudes and choices towards managing money.
    Keywords: financial planning, budgeting, household finance, financial control, financial self-efficacy, financial literacy, financial knowledge
    JEL: D14 G51 G53 C21 C51
    Date: 2022–11
  3. By: Gopi Shah Goda (Stanford University); Matthew R. Levy (London School of Economics and Political Science); Colleen Flaherty Manchester (University of Minnesota - Twin Cities); Aaron Sojourner (W.E. Upjohn Institute for Employment Research); Joshua Tasoff (Claremont Graduate University); Jiusi Xiao (Claremont Graduate University)
    Abstract: We conduct a randomized controlled trial to understand how a web-based retirement saving calculator affects workers’ retirement-savings decisions. In both conditions, the calculator projects workers’ retirement income goals. In the treatment condition, it also projects retirement income based on defined-contribution savings, prominently displays the gap between projected goal and actual retirement income, and allows users to interactively explore how alternative, future contribution choices would affect the gap. The treatment increased average annual retirement contributions by $174 (2.3 percent). However, effects were larger for those with greater financial knowledge, suggesting this type of tool complements, rather than substitutes for, underlying financial capability.
    Keywords: retirement planning, retirement saving, exponential-growth bias, present bias, financial literacy, financial capability
    JEL: D14 G53 J32
    Date: 2022–11
  4. By: Lorenz Meister; Karla Schulze
    Abstract: While there is a broad consensus in the literature that stock ownership is associated with individual characteristics, such as wealth, income, risk preferences, and financial literacy, less is known about the dynamics of stock market participation (SMP). Major fluctuations in SMP are oftentimes related to political events, economic shocks, and technological disruptions. We discuss the literature that investigates some of these shocks, as well as personal life circumstances that determine SMP across various demographic groups. Consolidating the literature allows us to identify systematic drivers into and out of stock ownership, along with its distributional consequences. Major forces behind SMP fluctuations are changes in participation costs and benefits, risk exposure, economic policy uncertainty, income uncertainty, peer effects, and windfall gains.
    Date: 2022

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