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Fearless Woman: Financial Literacy and Stock Market Participation

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  • Lusardi, Annamaria
  • Bucher-Koenen, Tabea
  • Alessie, Rob
  • Van Rooij, Maarten

Abstract

Women are less financially literate than men. It is unclear whether this gap reflects a lack of knowledge or, rather, a lack of confidence. Our survey experiment shows that women tend to disproportionately respond “do not know†to questions measuring financial knowledge, but when this response option is unavailable, they often choose the correct answer. We estimate a latent class model and predict the probability that respondents truly know the correct answers. We find that about one-third of the financial literacy gender gap can be explained by women’s lower confidence levels. Both financial knowledge and confidence explain stock market participation.

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  • Lusardi, Annamaria & Bucher-Koenen, Tabea & Alessie, Rob & Van Rooij, Maarten, 2021. "Fearless Woman: Financial Literacy and Stock Market Participation," CEPR Discussion Papers 15913, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15913
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    Keywords

    Financial knowledge; Gender gap; Financial decision making; Confidence; Measurement error; Latent class model; Finite mixture model;
    All these keywords.

    JEL classification:

    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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