Work

Measuring the Financial Sophistication of Households

Year: 2009

Type: article

Abstract: This paper constructs an index of financial sophistication that, in comprehensive data on Swedish households, best explains a set of three investment mistakes: underdiversification, risky share inertia, and the tendency to sell winning stocks and hold losing stocks (the disposition effect). The index of financial sophistication increases strongly with financial wealth and household size, and to a lesser extent with education and proxies for financial experience. The index is strongly positively correlated with the share of risky assets held by a household.

Source: American Economic Review

DOI: 10.1257/aer.99.2.393

Authors: Laurent E Calvet, John Y Campbell, Paolo Sodini

Institutions: HEC Paris, National Bureau of Economic Research, Harvard University, Stockholm School of Economics

Language: English

Topic: Financial Literacy, Pension, Retirement Analysis

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2244033944

FWCI: 52.3

Cites: 10

Cited by: 475

Related to: 10