Financial Literacy and Portfolio Diversification

Quantitative Finance, Vol. 10, No. 5, pp. 515-528, 2010

Posted: 14 Apr 2011

See all articles by Margarida Abreu

Margarida Abreu

ISEG-UTL; Technical University of Lisbon (UTL) - Research Unit on Complexity and Economics (UECE); Instituto Superior de Economia e Gestão - CISEP

Victor Mendes

CMVM - Comissao do Mercado de Valores Mobiliarios

Abstract

We use a survey of individual investors disclosed by the Portuguese securities commission (CMVM) in May 2005 to study the impact of investors’ levels of financial literacy on portfolio diversification. We consider distinct aspects of financial literacy, and control for socioeconomic and behavioral differences among individual groups of investors. Our results suggest that investors’ educational levels and their financial knowledge have a positive impact on investor diversification. The information sources used by retail investors to gather information on markets and financial products also have a significant impact on the number of different assets included in a portfolio.

Keywords: Educational Finance, Resource Allocation

JEL Classification: G11, I20, G32, J24

Suggested Citation

Abreu, Margarida and Mendes, Victor, Financial Literacy and Portfolio Diversification. Quantitative Finance, Vol. 10, No. 5, pp. 515-528, 2010, Available at SSRN: https://ssrn.com/abstract=1808666

Margarida Abreu (Contact Author)

ISEG-UTL ( email )

R. Miguel Lupi, 20
Lisbon, 1200
Portugal

Technical University of Lisbon (UTL) - Research Unit on Complexity and Economics (UECE) ( email )

Rua Miguel Lupi, 20
Lisboa, 1200-781
Portugal

Instituto Superior de Economia e Gestão - CISEP ( email )

Rua Miguel Lupi 20
Lisboa, 1200-725
Portugal

Victor Mendes

CMVM - Comissao do Mercado de Valores Mobiliarios ( email )

Avenida Fontes Pereira de Melo, 21
Lisbon, 1056-801
Portugal
(351) 213177000 (Phone)
(351) 213537077/8 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,968
PlumX Metrics