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Financial literacy and household asset allocation: Evidence from micro‐data in China

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  • Xiaomeng Lu
  • Jingna Xiao
  • Yu Wu

Abstract

Improving household asset allocation (HAA) ability can enable households to increase consumption and promote the steady growth of China's economy. However, HAA decisions in China are suboptimal. This may be related to households' limited financial literacy. Based on 2017 and 2019 China Household Finance Survey data, this study examines the role of financial literacy in improving HAA. It finds that the higher the household's financial literacy, the higher the household's score in the asset allocation evaluation because households with higher financial literacy pay greater attention to economic and financial news and are more inclined to seek advice from investment advisors. Further analysis shows that the optimization effect of financial literacy on HAA is greater in households that are wealthy, higher educated, and located in areas with better regional financial development. In conclusion, helping households improve their financial literacy is an important step toward improving HAA ability.

Suggested Citation

  • Xiaomeng Lu & Jingna Xiao & Yu Wu, 2021. "Financial literacy and household asset allocation: Evidence from micro‐data in China," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(4), pages 1464-1488, December.
    • Handle: RePEc:bla:jconsa:v:55:y:2021:i:4:p:1464-1488
    DOI: 10.1111/joca.12406
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    2. Yan Liu & Quaner Wen & Abbas Ali Chandio & Long Chen & Lu Gan, 2022. "Investment Risk Analysis for Green and Sustainable Planning of Rural Family: A Case Study of Tibetan Region," Sustainability, MDPI, vol. 14(19), pages 1-19, September.
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    4. Fang Xu & Xiaoru Zhang & Di Zhou, 2024. "Does digital financial inclusion reduce the risk of returning to poverty? Evidence from China," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 2927-2949, July.
    5. Abu Elnasr E. Sobaih & Ibrahim A. Elshaer, 2023. "Risk-Taking, Financial Knowledge, and Risky Investment Intention: Expanding Theory of Planned Behavior Using a Moderating-Mediating Model," Mathematics, MDPI, vol. 11(2), pages 1-17, January.
    6. Guo, Fusen & Li, Feng & Lu, Xiaomeng, 2024. "Does financial advisors improve portfolio efficiency for individual investors? Evidence from large-scale microdata," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 400-412.
    7. Trang M. T. Phung & Quoc N. Tran & Phuong Nguyen‐Hoang & Nhut H. Nguyen & Tho H. Nguyen, 2023. "The role of learning motivation on financial knowledge among Vietnamese college students," Journal of Consumer Affairs, Wiley Blackwell, vol. 57(1), pages 529-563, January.
    8. Preston, Alison & Qiu, Lili & Wright, Robert E., 2022. "A Study of the Chinese Gender Gap in Financial Literacy," IZA Discussion Papers 15253, Institute of Labor Economics (IZA).

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