IDEAS home Printed from https://ideas.repec.org/a/gam/jecnmx/v12y2024i4p33-d1515085.html
   My bibliography  Save this article

Likert Scale Variables in Personal Finance Research: The Neutral Category Problem

Author

Listed:
  • Blain Pearson

    (Department of Finance and Economics, Coastal Carolina University, Conway, SC 29526, USA)

  • Donald Lacombe

    (School of Financial Planning, Texas Tech University, Lubbock, TX 79409, USA)

  • Nasima Khatun

    (School of Financial Planning, Texas Tech University, Lubbock, TX 79409, USA)

Abstract

Personal finance research often utilizes Likert-type items and Likert scales as dependent variables, frequently employing standard probit and ordered probit models. If inappropriately modeled, the “neutral” category of discrete dependent variables can bias estimates of the remaining categories. Through the utilization of hierarchical models, this paper demonstrates a methodology that accounts for the econometric issues of the neutral category. We then analyze the technique through an empirical exercise relevant to personal finance research using data from the National Financial Capability Study. We demonstrate that ignoring the “neutral” category bias can lead to incorrect inferences, hindering the progression of personal finance research. Our findings underscore the importance of refining statistical modeling techniques when dealing with Likert-type data. By accounting for the neutral category, we can enhance the reliability of personal finance research outcomes, fostering improved decision-relevant insights.

Suggested Citation

  • Blain Pearson & Donald Lacombe & Nasima Khatun, 2024. "Likert Scale Variables in Personal Finance Research: The Neutral Category Problem," Econometrics, MDPI, vol. 12(4), pages 1-11, November.
    • Handle: RePEc:gam:jecnmx:v:12:y:2024:i:4:p:33-:d:1515085
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2225-1146/12/4/33/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2225-1146/12/4/33/
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jecnmx:v:12:y:2024:i:4:p:33-:d:1515085. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.