Calvet, Laurent E. <br/><br/>
Measuring the Financial Sophistication of Households / 
Laurent E. Calvet, John Y. Campbell, Paolo Sodini. 
 - Cambridge, Mass.  National Bureau of Economic Research  2009. 
 - 1 online resource:  illustrations (black and white); 
 - NBER working paper series  no. w14699 .
 - Working Paper Series (National Bureau of Economic Research)  no. w14699. .
<br/><br/> February 2009. 
<br/><br/> 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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