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The Behavioural Aspects of Financial Literacy

Author

Listed:
  • Florian Gerth

    (Faculty of Business, University of Wollongong in Dubai, Dubai P.O. Box 20183, United Arab Emirates)

  • Katia Lopez

    (Researchers Sans Frontiers, Dubai P.O. Box 73000, United Arab Emirates)

  • Krishna Reddy

    (Postgraduate Business, Faculty of Health, Education, and Environment, Toi Ohomai Institute of Technology, Rotorua 3046, New Zealand)

  • Vikash Ramiah

    (Faculty of Business, University of Wollongong in Dubai, Dubai P.O. Box 20183, United Arab Emirates)

  • Damien Wallace

    (UniSA Business, University of South Australia, Adelaide 5000, Australia)

  • Glenn Muschert

    (Faculty of Humanities and Social Sciences, Khalifa University of Science and Technology, Abu Dhabi P.O. Box 127788, United Arab Emirates)

  • Alex Frino

    (Faculty of Business, University of Wollongong in Dubai, Dubai P.O. Box 20183, United Arab Emirates)

  • Leonie Jooste

    (Faculty of Management, Canadian University Dubai, Dubai P.O. Box 117781, United Arab Emirates)

Abstract

In this paper, we investigate the contribution of behavioural characteristics to the financial literacy of UAE residents after controlling for demographic factors. Specifically, we test the relationship between financial literacy and behavioural biases such as representativeness, self-serving, overconfidence, loss aversion, and hindsight bias. Using data collected through survey questionnaires, we apply the methodology developed by the Organization of Economic Co-operation and Development (OECD) to compute financial literacy scores. Our overall results show that all behavioural biases except for overconfidence bias are positively related to financial literacy. Furthermore, some biases exhibit a stronger quantitative relationship with financial literacy than others. For example, hindsight bias displays the strongest link to financial literacy, followed by self-serving bias. The weakest but still statistically significant effect is loss aversion bias. Although biases, in general, have negative connotations, behavioural biases appear to be related to higher levels of financial literacy.

Suggested Citation

  • Florian Gerth & Katia Lopez & Krishna Reddy & Vikash Ramiah & Damien Wallace & Glenn Muschert & Alex Frino & Leonie Jooste, 2021. "The Behavioural Aspects of Financial Literacy," JRFM, MDPI, vol. 14(9), pages 1-16, August.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:9:p:395-:d:621239
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    References listed on IDEAS

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