IDEAS home Printed from https://ideas.repec.org/a/sae/mareco/v13y2019i1p83-108.html
   My bibliography  Save this article

Advanced Financial Literacy of Malaysian Gen Y Investors and Its Consequences

Author

Listed:
  • Mohammad Tariqul Islam Khan
  • Siow-Hooi Tan
  • Gerald Goh Guan Gan

Abstract

This article presents the advanced financial literacy of Malaysian Gen Y investors and investigates whether literacy varies across demographics and ethnicity, and how financial literacy is related to investing decisions. In a survey-based study (N = 231) with the estimation of crosstab, ordered logistic regression and binary logistic regression, the results suggest that Gen Y investors display a medium level of financial literacy and that investors with certain demographic characteristics and ethnicity display a relatively higher level of financial literacy. Literacy items such as knowledge of stocks and bonds, functioning of the stock market, working of long-term bonds and mutual funds, and riskiness of bonds versus stocks are more closely related to investors’ trading, risky share investment, willingness of risk-taking, stock market participation and perceived portfolio returns. The results imply a clear scope to improve Gen Y investors’ financial literacy by concentrating on a certain socio-demographic groups and specific financial literacy items. JEL Classifications: D14, G11, I20

Suggested Citation

  • Mohammad Tariqul Islam Khan & Siow-Hooi Tan & Gerald Goh Guan Gan, 2019. "Advanced Financial Literacy of Malaysian Gen Y Investors and Its Consequences," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 13(1), pages 83-108, February.
  • Handle: RePEc:sae:mareco:v:13:y:2019:i:1:p:83-108
    DOI: 10.1177/0973801018800085
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0973801018800085
    Download Restriction: no

    File URL: https://libkey.io/10.1177/0973801018800085?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Daniel Fernandes & John G. Lynch & Richard G. Netemeyer, 2014. "Financial Literacy, Financial Education, and Downstream Financial Behaviors," Management Science, INFORMS, vol. 60(8), pages 1861-1883, August.
    2. Grohmann, Antonia & Kouwenberg, Roy & Menkhoff, Lukas, 2014. "Financial literacy and its consequences in the emerging middleclass," Kiel Working Papers 1943, Kiel Institute for the World Economy (IfW Kiel).
    3. Bruce Ian Carlin & David T. Robinson, 2012. "What Does Financial Literacy Training Teach Us?," The Journal of Economic Education, Taylor & Francis Journals, vol. 43(3), pages 235-247, July.
    4. Yiing Jia Loke, 2015. "Financial Knowledge and Behaviour of Working Adults in Malaysia," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 9(1), pages 18-38, February.
    5. van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob, 2011. "Financial literacy and stock market participation," Journal of Financial Economics, Elsevier, vol. 101(2), pages 449-472, August.
    6. Annamaria Lusardi & Olivia S Mitchelli, 2007. "Financial Literacy and Retirement Preparedness: Evidence and Implications for Financial Education," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 42(1), pages 35-44, January.
    7. Laurent E. Calvet & John Y. Campbell & Paolo Sodini, 2007. "Down or Out: Assessing the Welfare Costs of Household Investment Mistakes," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 707-747, October.
    8. Azwadi Ali & Mohd Rahman & Alif Bakar, 2015. "Financial Satisfaction and the Influence of Financial Literacy in Malaysia," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 120(1), pages 137-156, January.
    9. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, June.
    10. Tullio Jappelli, 2010. "Economic Literacy: An International Comparison," Economic Journal, Royal Economic Society, vol. 120(548), pages 429-451, November.
    11. Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Baby Boomer retirement security: The roles of planning, financial literacy, and housing wealth," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 205-224, January.
    12. Sumit Agarwal & John C. Driscoll & Xavier Gabaix & David Laibson, 2009. "The Age of Reason: Financial Decisions over the Life Cycle and Implications for Regulation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(2 (Fall)), pages 51-117.
    13. Annamaria Lusardi & Olivia Mitchell, 2006. "Financial Literacy and Retirement Preparedness: Evidence and Implications for Financial Education Programs," Working Papers wp144, University of Michigan, Michigan Retirement Research Center.
    14. Christian Ehm & Christine Kaufmann & Martin Weber, 2014. "Volatility Inadaptability: Investors Care About Risk, but Cannot Cope with Volatility," Review of Finance, European Finance Association, vol. 18(4), pages 1387-1423.
    15. Kaplanski, Guy & Levy, Haim & Veld, Chris & Veld-Merkoulova, Yulia, 2015. "Do Happy People Make Optimistic Investors?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 50(1-2), pages 145-168, April.
    16. Armstrong, J. Scott & Overton, Terry S., 1977. "Estimating Nonresponse Bias in Mail Surveys," MPRA Paper 81694, University Library of Munich, Germany.
    17. Agarwal, Sumit & Amromin, Gene & Ben-David, Itzhak & Chomsisengphet, Souphala & Evanoff, Douglas D., 2015. "Financial literacy and financial planning: Evidence from India," Journal of Housing Economics, Elsevier, vol. 27(C), pages 4-21.
    18. Bernd Hardeweg & Lukas Menkhoff & Hermann Waibel, 2013. "Experimentally Validated Survey Evidence on Individual Risk Attitudes in Rural Thailand," Economic Development and Cultural Change, University of Chicago Press, vol. 61(4), pages 859-888.
    19. Shen, Chung-Hua & Lin, Shih-Jie & Tang, De-Piao & Hsiao, Yu-Jen, 2016. "The relationship between financial disputes and financial literacy," Pacific-Basin Finance Journal, Elsevier, vol. 36(C), pages 46-65.
    20. Luigi Guiso & Tullio Jappelli, 2008. "Financial Literacy and Portfolio Diversification," EIEF Working Papers Series 0812, Einaudi Institute for Economics and Finance (EIEF), revised Oct 2008.
    21. Klapper, Leora & Lusardi, Annamaria & Panos, Georgios A., 2013. "Financial literacy and its consequences: Evidence from Russia during the financial crisis," Journal of Banking & Finance, Elsevier, vol. 37(10), pages 3904-3923.
    22. Alexander Kempf & Christoph Merkle & Alexandra Niessen†Ruenzi, 2014. "Low Risk and High Return – Affective Attitudes and Stock Market Expectations," European Financial Management, European Financial Management Association, vol. 20(5), pages 995-1030, November.
    23. Laibson, David I. & Agarwal, Sumit & Driscoll, John C. & Gabaix, Xavier, 2009. "The Age of Reason: Financial Decisions over the Life-Cycle with Implications for Regulation," Scholarly Articles 4554335, Harvard University Department of Economics.
    24. Mohamad Fazli Sabri* & Teo Tze Juen & Mohd. Amim Othman & Husniyah Abdul Rahim, 2015. "Financial literacy, financial Management practices, and retirement confidence among Women working in government Agencies: A mediation model," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(5), pages 405-412, Special I.
    25. Mohammad Tariqul Islam Khan & Siow-Hooi Tan & Lee-Lee Chong, 2017. "Perception of past portfolio returns, optimism and financial decisions," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 9(1), pages 79-98, April.
    26. Abreu, Margarida & Mendes, Victor, 2012. "Information, overconfidence and trading: Do the sources of information matter?," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 868-881.
    27. Annamarie Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," Working Papers wp108, University of Michigan, Michigan Retirement Research Center.
    28. Sondra G. Beverly & Marianne A. Hilgert & Jeanne M. Hogarth, 2003. "Household financial management: the connection between knowledge and behavior," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jul, pages 309-322.
    29. Halko, Marja-Liisa & Kaustia, Markku & Alanko, Elias, 2012. "The gender effect in risky asset holdings," Journal of Economic Behavior & Organization, Elsevier, vol. 83(1), pages 66-81.
    30. Mohamad Fazli Sabri* & Teo Tze Juen, & Mohd. Amim Othman & Husniyah Abdul Rahim, 2015. "Financial literacy, financial Management practices, and retirement confidence among Women working in government Agencies: A mediation model," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(6), pages 405-412, Special I.
    31. Martin Weber & Elke U. Weber & Alen Nosić, 2013. "Who takes Risks When and Why: Determinants of Changes in Investor Risk Taking," Review of Finance, European Finance Association, vol. 17(3), pages 847-883.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shen, Chung-Hua & Lin, Shih-Jie & Tang, De-Piao & Hsiao, Yu-Jen, 2016. "The relationship between financial disputes and financial literacy," Pacific-Basin Finance Journal, Elsevier, vol. 36(C), pages 46-65.
    2. Azra Zaimovic & Anes Torlakovic & Almira Arnaut-Berilo & Tarik Zaimovic & Lejla Dedovic & Minela Nuhic Meskovic, 2023. "Mapping Financial Literacy: A Systematic Literature Review of Determinants and Recent Trends," Sustainability, MDPI, vol. 15(12), pages 1-30, June.
    3. Oscar A. Stolper & Andreas Walter, 2017. "Financial literacy, financial advice, and financial behavior," Journal of Business Economics, Springer, vol. 87(5), pages 581-643, July.
    4. Balasubramnian, Bhanu & Sargent, Carol Springer, 2020. "Impact of inflated perceptions of financial literacy on financial decision making," Journal of Economic Psychology, Elsevier, vol. 80(C).
    5. Lin, Chaonan & Hsiao, Yu-Jen & Yeh, Cheng-Yung, 2017. "Financial literacy, financial advisors, and information sources on demand for life insurance," Pacific-Basin Finance Journal, Elsevier, vol. 43(C), pages 218-237.
    6. Paiella, Monica, 2016. "Financial literacy and subjective expectations questions: A validation exercise," Research in Economics, Elsevier, vol. 70(2), pages 360-374.
    7. Grohmann, Antonia & Kouwenberg, Roy & Menkhoff, Lukas, 2015. "Childhood roots of financial literacy," Journal of Economic Psychology, Elsevier, vol. 51(C), pages 114-133.
    8. Kadoya, Yoshihiko & Khan, Mostafa Saidur Rahim, 2020. "What determines financial literacy in Japan?," Journal of Pension Economics and Finance, Cambridge University Press, vol. 19(3), pages 353-371, July.
    9. Agarwal, Sumit & Amromin, Gene & Ben-David, Itzhak & Chomsisengphet, Souphala & Evanoff, Douglas D., 2015. "Financial literacy and financial planning: Evidence from India," Journal of Housing Economics, Elsevier, vol. 27(C), pages 4-21.
    10. Grohmann, Antonia & Hübler, Olaf & Kouwenberg, Roy & Menkhoff, Lukas, 2021. "Financial literacy: Thai middle-class women do not lag behind," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    11. Manuel Salas‐Velasco & Dolores Moreno‐Herrero & José Sánchez‐Campillo, 2021. "Teaching financial education in schools and students' financial literacy: A cross‐country analysis with PISA data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4077-4103, July.
    12. Josephat Lotto, 2020. "Towards Improving Households’ Investment Choices in Tanzania: Does Financial Literacy Really Matter?," IJFS, MDPI, vol. 8(2), pages 1-10, May.
    13. Almenberg, Johan & Dreber, Anna, 2015. "Gender, stock market participation and financial literacy," Economics Letters, Elsevier, vol. 137(C), pages 140-142.
    14. Florian Deuflhard & Dimitris Georgarakos & Roman Inderst, 2019. "Financial Literacy and Savings Account Returns," Journal of the European Economic Association, European Economic Association, vol. 17(1), pages 131-164.
    15. Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Financial literacy and retirement planning: New evidence from the Rand American Life Panel," CFS Working Paper Series 2007/33, Center for Financial Studies (CFS).
    16. Grohmann, Antonia, 2018. "Financial literacy and financial behavior: Evidence from the emerging Asian middle class," Pacific-Basin Finance Journal, Elsevier, vol. 48(C), pages 129-143.
    17. Mouna, Amari & Anis, Jarboui, 2017. "Financial literacy in Tunisia: Its determinants and its implications on investment behavior," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 568-577.
    18. van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob, 2011. "Financial literacy and stock market participation," Journal of Financial Economics, Elsevier, vol. 101(2), pages 449-472, August.
    19. Ziyuan Lyu & Li Wei, 2021. "Information sources and participation in the Chinese insurance market: knowledge as a mediator," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(1), pages 79-106, January.
    20. Ćumurović, Aida & Hyll, Walter, 2016. "Financial Literacy and Self-employment," IWH Discussion Papers 11/2016, Halle Institute for Economic Research (IWH).

    More about this item

    Keywords

    Generation Y investor; Financial literacy; Demography; Ethnicity; Investment; Malaysia;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • I20 - Health, Education, and Welfare - - Education - - - General

    Statistics

    Access and download statistics

    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:sae:mareco:v:13:y:2019:i:1:p:83-108. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: SAGE Publications (email available below). General contact details of provider: http://www.ncaer.org/ .

    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.