This paper aims at decomposing the forecast error variance of excess returns in five major European stock markets into the variance of news about future excess returns, dividends and real interest rates. Special emphasis is given on the issue of stationarity and structural breaks in the...

We match administrative panel data on portfolio choices with survey measures of financial literacy. We observe that, controlling for portfolio risk, most literate households experience 0.4% higher annual returns than least literate households. We then show that more literate households display...