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Financial Self-awareness: Who Knows What They Don’t Know?

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  • Bazley, William J.
  • Bonaparte, Yosef
  • Korniotis, George M.

Abstract

We examine the influence of financial literacy and perceptions of financial knowledge on households’ financial risk-taking. Greater literacy and self-belief in one’s literacy positively relate to equity ownership. However, self-awareness of illiteracy reduces participation by about 5%. We find that financial self-awareness is impacted by innate traits and environmental elements. Specifically, it is reduced by risk-seeking preferences and rising income but increases with income uncertainty. Overall, we demonstrate that accurate self-assessment has implications for individuals’ portfolio choices, which suggests policy implications for improving financial decision-making.

Suggested Citation

  • Bazley, William J. & Bonaparte, Yosef & Korniotis, George M., 2021. "Financial Self-awareness: Who Knows What They Don’t Know?," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319311043
    DOI: 10.1016/j.frl.2020.101445
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    References listed on IDEAS

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    Cited by:

    1. Batool Muhammad Hussain & Umair Baig & Vida Davidaviciene & Ieva Meidute-Kavaliauskiene, 2021. "A Thoughtful Insight on Women Entrepreneur’s Investment Attitude," Economies, MDPI, vol. 9(4), pages 1-19, December.

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    More about this item

    Keywords

    Stock market participation; Financial literacy; Self-awareness;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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