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A financial sophistication proxy for the Survey of Consumer Finances

Author

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  • Sandra J. Huston
  • Michael S. Finke
  • Hyrum Smith

Abstract

The Survey of Consumer Finances (SCF) contains detailed US household balance sheet information and is frequently used to study outcomes in household finance. There is no variable that explicitly measures financial sophistication in the SCF. We propose a factor score composed of four questions that can serve as a proxy of financial sophistication to correct a possible important omitted variable bias. The results using the sophistication factor show how controlling for financial sophistication provides a more precise estimate of the marginal effects of control variables such as education and race.

Suggested Citation

  • Sandra J. Huston & Michael S. Finke & Hyrum Smith, 2012. "A financial sophistication proxy for the Survey of Consumer Finances," Applied Economics Letters, Taylor & Francis Journals, vol. 19(13), pages 1275-1278, September.
    • Handle: RePEc:taf:apeclt:v:19:y:2012:i:13:p:1275-1278
    DOI: 10.1080/13504851.2011.619485
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    Cited by:

    1. Gabriel Garber & Sergio Mikio Koyama, 2017. "Policy-effective Financial Knowledge and Attitude Factors in Latin America," Working Papers Series 469, Central Bank of Brazil, Research Department.
    2. Nikolaos Satsios & Spyros Hadjidakis, 2018. "Applying the Theory of Planned Behaviour (TPB) in Saving Behaviour of Pomak Households," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 9(2), pages 122-133, April.
    3. Gabriel Garber & Sergio Mikio Koyama, 2016. "Policy-effective Financial Knowledge and Attitude Factors," Working Papers Series 430, Central Bank of Brazil, Research Department.
    4. Barry Mulholland & Michael Finke & Sandra Huston, 2016. "Understanding the Shift in Demand for Cash Value Life Insurance," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 19(1), pages 7-36, March.
    5. Cassandra R. Cole & Stephen G. Fier, 2021. "An examination of life insurance policy surrender and loan activity," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(2), pages 483-516, June.

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