Financial Literacy and Stock Market Participation

摘要: Individuals are increasingly put in charge of their financial security after retirement. Moreover, the supply complex products has increased considerably over years. However, we still have little or no information about whether individuals knowledge and skills to navigate this new environment. To better understand literacy its relation decision-making, devised two special modules for DNB Household Survey. We designed questions measure numeracy basic related working inflation interest rates, as well more advanced market instruments (stocks, bonds, mutual funds). evaluate importance by studying stock market: Are financially knowledgeable likely hold stocks? assess direction causality, make use measuring before investing market. find that, while understanding economic concepts rate compounding is far from perfect, it outperforms limited stocks concept risk diversification, markets. also that measurement very sensitive wording survey questions. This provides additional evidence knowledge. Finally, report an independent effect on participation: Those who low significantly less invest stocks.