Measuring the Financial Sophistication of Households / Laurent E. Calvet, John Y. Campbell, Paolo Sodini.

By:

Calvet, Laurent E

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w14699.Publication details: Cambridge, Mass. National Bureau of Economic Research 2009.Description: 1 online resource: illustrations (black and white)Subject(s):

G11 - Portfolio Choice • Investment Decisions

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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.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w14699 (Browse shelf(Opens below))	Not For Loan

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February 2009.

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.