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Financial Literacy Overconfidence and Stock Market Participation

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Abstract

Stock market participation is considered as an indicator of consumer financial well-being. This study examined the association between financial literacy overconfidence and stock market participation. Financial literacy overconfidence was measured by the difference between an individual’s subjective and objective financial literacy scores. Data from the 2012 Chinese Survey of Consumer Finance was analyzed. The results showed that financial literacy overconfidence is positively correlated with stock market participation. On the other hand, under-confidence is negatively correlated to stock market participation. This study contributes to the existing literature by relating a unique factor, financial literacy overconfidence, to stock market participation.

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Acknowledgments

Project 71232003 & 71002074 supported by the National Natural Science Foundation of China.

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Authors and Affiliations

  1. School of Economics and Management, Tsinghua University, Beijing, 100084, People’s Republic of China

    Tian Xia

  2. PBC School of Finance, Tsinghua University, Beijing, 100083, People’s Republic of China

    Zhengwei Wang

  3. International School of Economics and Management, Capital University of Economics and Business, Beijing, 100070, People’s Republic of China

    Kunpeng Li

Authors
  1. Tian Xia
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  2. Zhengwei Wang
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  3. Kunpeng Li
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Correspondence to Zhengwei Wang.

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Xia, T., Wang, Z. & Li, K. Financial Literacy Overconfidence and Stock Market Participation. Soc Indic Res 119, 1233–1245 (2014). https://doi.org/10.1007/s11205-013-0555-9

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  • DOI: https://doi.org/10.1007/s11205-013-0555-9

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