I analyze a static, noisy rational expectations equilibrium model where traders exchange vectors of assets accessing multi-dimensional information under two alternative market structures. In the first (the unrestricted system), informed speculators condition their demands for each asset on all...

This paper shows that information effects per se are not responsible for the Gi®en goods anomaly affecting competitive traders' demands in multi-asset, noisy rational expectations equilibrium models. The role that information plays in traders' strategies also matters. In a market with risk...

Since the early 2000s, the importance of financial literacy for safe financial behaviors has increased in public debate and has been the motivation for several national and international institutions to launch and promote financial education initiatives. Although discussion on the effects of...

The underpricing of the shares sold through Initial Public Offerings (IPOs) is generally explained with asymmetric information and risk. We complement these traditional explanations with a new theory. Investors who buy IPO shares are also concerned by expected liquidity and by the uncertainty...

In this paper we focus on poor financial literacy as one potential factor explaining lack of portfolio diversification. We use the 2007 Unicredit Customers’ Survey, which has indicators of portfolio choice, financial literacy and many demographic characteristics of investors. We first propose...

Rational investors perceive correctly the value of financial information. Investment in information is therefore rewarded with a higher Sharpe ratio. Overconfident investors overstate the quality of their own information, and thus attain a lower Sharpe ratio. We contrast the implications of the...

We provide a detailed account of the portfolio of Italian households and its evolution, using repeated cross-sectional and panel data drawn from the 1989-98 Bank of Italy Survey of Household Income and Wealth. We offer an in-depth description of the lifetime pattern of asset holdings and their...

We use two data sets, one from a large brokerage and another from a major bank, to ask: (i) whether financial advisors tend to be matched with poorer, uninformed investors or with richer, experienced but presumably busy investors; (ii) how advised accounts actually perform relative to...

We study a model in which financial sophistication improves portfolio returns and therefore the incentive to substitute consumption intertemporally. The model delivers an Euler equation in which consumption growth is positively correlated with financial sophistication. We test the model's...

We present an intertemporal consumption model of consumer investment in financial literacy. Consumers benefit from such investment because their stock of financial literacy allows them to increase the returns on their wealth. Since literacy depreciates over time and has a cost in terms of...