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Financial Literacy is associated with Stock Market Expectations but not with Forecast Accuracy: Evidence from Germany

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  • Buschong, René

Abstract

Using a representative panel dataset, this study focuses on stock market expectations as well as the accuracy of forecasts made by private households in Germany. First, I find evidence that higher financial literacy is associated with lower stock market expectations. However, there is no evidence that financial literacy is associated with the accuracy of forecasts. Second, the findings suggest that individuals form their expectations based on past performance: The three-month stock market return prior to being surveyed is associated with stated expectations and this association is heterogenous by financial literacy levels.

Suggested Citation

  • Buschong, René, 2022. "Financial Literacy is associated with Stock Market Expectations but not with Forecast Accuracy: Evidence from Germany," EconStor Preprints 266404, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:266404
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    File URL: https://www.econstor.eu/bitstream/10419/266404/1/Buschong%20-%20DAX%20Forecast%20Accuracy.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    financial literacy; stock market expectations; forecast error; stock market participation;
    All these keywords.

    JEL classification:

    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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