Financial Literacy, Gender and Investment Choices
By Xin Wen, Zhiming Cheng & Massimiliano Tani
Over the past thirty years Chinese households have enjoyed substantive increases in income and savings and witnessed a rapidly developing financial market offering investment choices and risks away from bank deposits – the traditional form of financial investment. We explore whether this evolving landscape has been advantageous to every investor or mainly those with better financial literacy, by focusing on the portfolio decisions of the household head, by gender. Using data from the 2013 and 2015 China Household Finance Survey and applying panel random effect techniques, we find that better financial literacy is associated with higher participation in the share market, regardless of gender. However, we also find that female investors in retirement age have a distinct preference for risky assets, against evidence of higher risk aversion among women vs. men, and common advice to invest in less risky assets if nearing or in retirement. The risk-loving preference of older women is consistent with the high wealth accumulated during their working lives and their secure pension and other old-age support. Nevertheless, it also exposes a potential moral hazard issue that may negatively affect society should asset prices suddenly decline.
Source: SSRN
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