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Financial Literacy, Households' Investment Behavior, and Risk Propensity

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  • Emanuele Bajo
  • Massimiliano Barbi
  • Sandro Sandri

Abstract

We investigate the role of socio-demographic characteristics of households on their level of self-declared financial literacy and investment experience, and the effect of financial literacy on household risk aversion, leveraging on about 38,000 MiFID questionnaires provided to us by an Italian primary bank. We find that the level of financial literacy is lower for the young and the old, women, less wealthy and financial fragile, lesseducated individuals living in the Southern part of Italy, and in less densely populated areas. Past professional expertise in a finance-related field helps increasing the level of financial literacy. Risk aversion of households is significantly affected by financial literacy, as the less financially knowledgeable tend to be more risk averse.

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  • Emanuele Bajo & Massimiliano Barbi & Sandro Sandri, 2015. "Financial Literacy, Households' Investment Behavior, and Risk Propensity," Journal of Financial Management, Markets and Institutions, Società editrice il Mulino, issue 1, pages 157-174, June.
    • Handle: RePEc:mul:jdp901:doi:10.12831/80534:y:2015:i:1:p:157-174
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    2. Lu, Zhiqiang & Wu, Junjie & Li, Hongyu & Galloway, Brian, 2024. "Digital finance and stock market participation: The case of internet wealth management products in China," Economic Systems, Elsevier, vol. 48(1).
    3. Heena Thanki & Sweety Shah & Vrajlal Sapovadia & Ankit D. Oza & Dumitru Doru Burduhos-Nergis, 2022. "Role of Gender in Predicting Determinant of Financial Risk Tolerance," Sustainability, MDPI, vol. 14(17), pages 1-13, August.
    4. Yılmaz Bayar & H. Funda Sezgin & Ömer Faruk Öztürk & Mahmut Ünsal Şaşmaz, 2020. "Financial Literacy and Financial Risk Tolerance of Individual Investors: Multinomial Logistic Regression Approach," SAGE Open, , vol. 10(3), pages 21582440209, July.

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