We examine underlying factors that explain an exceptionally low stock market participation rate among Lithuanian households by carrying out a comprehensive survey of mass affluent individuals. The probit regression analysis of the survey results indicates that lack of financial literacy, low...

This research investigates whether the financial literacy of individuals influences risk taking decisions and diversification behavior. This issue is relevant in that investors are increasingly in charge of their own financial security, but they have to deal with financial instruments whose...

Individual investors trade excessively, sell winners too soon, and overweight stocks with lottery features and low expected returns. This paper proposes and models a financial innovation, called stock loan lotteries, that improves individual investor performance. An individual investor signs a...

The majority of lower socioeconomic status (SES) households in the U.S. and Europe do not have stock investments, which is detrimental to wealth accumulation. Here, we examine one explanation for this puzzling fact, namely, that economic adversity may influence how people learn from financial...

We conduct a large scale survey of Swedish households to measure how much they understand about the science behind environmental impact, their financial literacy, as well as their understanding of their own knowledge of these matters. We find only moderate correlation in knowledge between...

Since the 1990s, the SEC has advocated for financial disclosures to be in "plain English" so that they would be more readable and informative. Past research has shown that high readability is related to more extreme investor judgments of firm performance. Processing fluency is the prevalent...

Previous research shows that many people seek financial advice from non-experts, and that peer interactions influence financial decisions. We investigate whether such influences are beneficial, harmful, or simply haphazard. In our laboratory experiment, face-to-face commu- nication with a...

This study aims to determine the factors that affect financial literacy in Japan using data from Osaka University's Preference Parameter Study in Japan. We examined fourteen variables covering respondents' demographic, socio-economic, and psychological backgrounds drawn from social learning,...

A fund's performance is usually compared to the performance of an index or other funds. If a fund trails the benchmark, the fund manager is often replaced. We argue that this may lead to excessive risk-taking if fund managers differ in ability and have the opportunity to take excessive risk. To...

We present a model with dynamic investment flows, where fund managers have the ability to generate excess returns and study how forcing them to commit part or all of their personal wealth to the fund they manage affects fund risk taking. We contrast the behavior of a manager that may invest her...