Financial Literacy, Naive Diversification, and Security Selection
By Thomas A. Hanson, Jenna Kalthoff
Low levels of financial literacy have been linked to costly errors in investing behavior. This paper examines the relationship between financial literacy and the two financial tasks of asset allocation and security selection in an online survey of college students. Results suggest that financial literacy can slightly attenuate the naïve diversification bias and improve security selection decisions. The results support educational efforts to increase financial literacy to improve retirement savings and financial decisions.
Source: SSRN
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