The Association between Subjective and Objective Financial Knowledge: Path Analysis to Investor Behavior by Age

Financial literacy affects stock market participation, as well as individuals’ age, gender, income, and education level. However, measuring financial literacy is more appropriate to identify individuals with strong knowledge of finance rather than average individuals with general knowledge. This could be problematic to identify general participation of the stock market and investment as more individuals are now participating without having to have such knowledge. This study explored how individuals’ subjective financial skills and well-being affect investment participation by age. Overall, males are likely to participate more in both retirement and non-retirement investment. In between the boomer generation and younger group, the younger generation who reported participating in a non-retirement investment, such as stock market were having a higher score on subjective financial well-being (STDYX = .052, 95% CI [.07, .08]; p < .05). Importantly, among the older group, subjective financial skill score becomes a predictor of participating stock market (STDYX = .09, 95% CI [.01, .17]; p < .05). As the result suggest, while younger participants focus more on financial well-being, such as having security on finances, when they are participating in a non-retirement investment, whereas older adults are likely to invest based on their beliefs on financial skills regardless of secured finances. A retirement plan has shifted toward less on savings and more on investing. Older adults are now interested more in participating in investments, such as the stock market than the young population, and the proper preparedness for those older adults in participating in the investment is needed.

Risk Factors of Financial Exploitation Versus Scam

Financial exploitation (FE) perpetrators are usually seen in a position of trust, such as family members or friends, whereas perpetrators of scam tend to be unknown individuals. Few empirical studies have examined victim risk factors, and this study aimed to systematically compare risk factors of FE versus scam. One-hundred-and-ninety-five adults (ages 18-89) were recruited to complete a 60-minute survey and interview at Purdue University in Indiana (n1=97) and Scripps College in California (n2=98). Risk factors assessed included cognitive tasks (overall cognition, memory, and executive decision), socio-emotional questionnaires (depression, resilience, ostracism, and social integration), financial measures (numeracy, objective financial knowledge, retirement worries, and financial well-being), physical health and demographics (age, gender, education level, marital status, ethnicity). Additionally, participants reported experiences of FE and scam, including (1) the 11-item short-form Older Adult Financial Exploitation Measure, (2) seven questions on scam from the Health and Retirement Study, and (3) likelihood to contact a scammer after reviewing lottery scam materials. The three dependent variables were log-transformed before OLS regression models were built. Each dependent variable was associated with different risk factors. Lower standard of living (p=.02) and ostracism (p<.05) independently predicted FE. Lower physical health (b=-.02, p=.003) was the strongest predictor of scam, with lower level of financial well-being (p=.02) serving as an independent predictor. For lottery scams contact likelihood, ostracism (b=.04, p=.005) and being male (b=-.23, p=.04) were the strongest predictors. Since risk factors differed between FE and scam, prevention and intervention programs should target the unique profiles of risk factors for each.

Financial Knowledge, Confidence, and Sustainable Financial Behavior

This paper analyzes the effect of financial knowledge and confidence in shaping individual investment choices, sustainable debt behavior, and preferences for socially and environmentally responsible financial companies. Exploiting data from the “Italian Literacy and Financial Competence Survey” (IACOFI) carried out by the Bank of Italy in early 2020, we address potential endogeneity concerns in order to investigate the causal effect of objective financial knowledge on individual financial behaviors. To this aim, we perform endogenous probit regressions, using the respondent’s long-term planning attitude, the use of information and communication technology devices, and the financial knowledge of peers as additional instrumental variables. Our main empirical findings show that objective financial knowledge exerts a positive and significant effect on financial market participation and preferences for ethical financial companies. Moreover, we provide strong empirical evidence about the role of confidence biases on individual financial behaviors. In particular, overconfident individuals display a higher probability of making financial investments, experiencing losses due to investment fraud, and being over-indebted. Conversely, underconfident individuals exhibit suboptimal investment choices, but are less likely to engage in risky financial behaviors.

On Present Value Evaluation under the Impact of Behavioural Factors Using Oriented Fuzzy Numbers

In general, the present value (PV) concept is ambiguous. Therefore, behavioural factors may influence on the PV evaluation. The main aim of our paper is to propose some method of soft computing PV evaluated under the impact of behavioural factors. The starting point for our discussion is the notion of the Behavioural PV (BPV) defined as an imprecisely real-valued function of distinguished variables which can be evaluated using objective financial knowledge or subjective behavioural premises. In our paper, a BPV is supplemented with a forecast of the asset price closest to changes. Such BPV is called the oriented BPV (O-BPV). We propose to evaluate an O-BPV by oriented fuzzy numbers which are more useful for portfolio analysis than fuzzy numbers. This fact determines the significance of the research described in this article. O-BPV may be applied as input signal for systems supporting invest-making. We consider here six cases of O-BPV: overvalued asset with the prediction of a rise in its price, overvalued asset with the prediction of a fall in its price, undervalued asset with the prediction of a rise in its price, undervalued asset with the prediction of a fall in its price, fully valued asset with the prediction of a rise in its rice and fully valued asset with the prediction of a fall in its rice. All our considerations are illustrated by numerical examples. Presented examples show the way in which we transform superposition of objective market knowledge and subjective investment opinion into simple return rate.

Disability Type, Financial Capability, and Risky Asset Holding

Risky financial asset holding is considered an indicator of financial well-being because risky asset holders are likely to accumulate more wealth than nonholders. Like the general population in the United States, many people with disabilities need long-term financial planning services. The purpose of this study was to examine whether disability type and financial capability are associated with risky asset holding of adults with disabilities. Using data from the 2015 National Financial Capability Study, we found that adults with different types of disabilities have different chances of holding risky assets. After controlling for financial capability, income, and other variables in the logistical model, people who are deaf or have difficulties running errands are more likely, while people with a work disability are less likely, than the mentally disabled to hold risky financial assets. In addition, two financial capability variables, objective financial knowledge, and desirable financial behavior, are positively associated with risky asset holding after controlling for other factors. Several disabilities, financial capability, and other factors showed differences in risky asset holding when lower-income and higher-income subsamples were examined.

Who Uses Mobile Payments: Fintech Potential in Users and Non-Users

This study used data from the 2015 National Financial Capability Study to analyze the adoption of mobile payments by U.S. households. While 24% of respondents used mobile payments, the mean rate for those under age 25 was 11 times the rate for those 65 and older. State rates ranged from about 9% in Montana to 34% in Washington, DC. Based on a logistic regression, age and an objective financial knowledge score were negatively while risk tolerance and a subjective financial knowledge score were positively related to mobile payment use. The results have implications for marketing of Fintech applications for personal finance, especially in terms of the extremely low mobile payment use by older consumers.

Competence, Confidence, and Gender: The Role of Objective and Subjective Financial Knowledge in Household Finance

We studied the association of individual differences in objective financial knowledge (i.e. competence), subjective financial knowledge (i.e. confidence), numeric ability, and cognitive reflection on a broad set of financial behaviors and feelings towards financial matters. We used a large diverse sample (N = 2063) of the adult Swedish population. We found that both objective and subjective financial knowledge predicted frequent engagement in sound financial practices, while numeric ability and cognitive reflection could not be linked to the considered financial behaviors when controlling for other relevant cognitive abilities. In addition, both objective and subjective financial knowledge served as a buffer against financial anxiety, while we did not detect similar buffering effects of numeric ability and cognitive reflection. Subjective financial knowledge was found to be a stronger predictor of sound financial behavior and subjective wellbeing than objective financial knowledge. Women reported a lower level of subjective financial wellbeing even though they reported a more prudent financial behavior than men, when controlling for sociodemographics and cognitive abilities. Our findings help to understand heterogeneity in people’s propensity to engage in sound financial behaviors and have implications for important policy issues related to financial education.