Financial Competence and Expectations Formation: Evidence from Australia

48 Pages Posted: 17 Apr 2011

See all articles by Hazel Bateman

Hazel Bateman

UNSW Sydney, CEPAR

Christine Eckert

University of Technology Sydney (UTS) - School of Marketing

John Geweke

University of Technology Sydney - Economics Discipline Group

Jordan J. Louviere

University of South Australia - Institute for Choice

Stephen E. Satchell

University of Cambridge - Faculty of Economics and Politics

Susan Thorp

University of Sydney Business School; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)

Multiple version iconThere are 4 versions of this paper

Date Written: April 13, 2011

Abstract

We study the financial competence of Australian retirement savers using self-assessed and quantified measures. Responses to numeracy and basic and sophisticated financial literacy questions show large variation and compare poorly with international surveys. We graph the relationships between financial competence index scores and a wide range of demographics, economic outcomes and attitudes. Results show significant variation of basic and sophisticated financial literacy measures with most demographics, self-assessed financial competence, income, superannuation accumulation and net worth. General numeracy scores show patterns of variation different to basic and sophisticated financial literacy, being largely constant by gender, age, higher education and personal income. Our results confirm the usefulness of studying numeracy and financial knowledge-based skills separately. We also consider the impact of financial competence on expectations of stock market performance. Consumers with higher understanding of risk, diversification and financial assets are more likely to assign a probability to future financial crises, and a time-frame to share market recovery, rather than expressing uncertainty.

Keywords: retirement savings, financial literacy, uncertainty

JEL Classification: G23, G28, D14

Suggested Citation

Bateman, Hazel and Eckert, Christine and Geweke, John and Louviere, Jordan J. and Satchell, Stephen E. and Thorp, Susan, Financial Competence and Expectations Formation: Evidence from Australia (April 13, 2011). UNSW Australian School of Business Research Paper No. 2011ACTL07. Available at SSRN: https://ssrn.com/abstract=1809166

Hazel Bateman

UNSW Sydney, CEPAR ( email )

High Street
Sydney, NSW 2052
Australia

Christine Eckert

University of Technology Sydney (UTS) - School of Marketing ( email )

P.O. Box 123
Broadway, NSW 2007
Australia

John Geweke

University of Technology Sydney - Economics Discipline Group ( email )

645 Harris Street
Sydney, NSW 2007
Australia
0295149797 (Phone)

HOME PAGE: http://www.censoc.uts.edu.au/about/members/jgeweke_papers.html

Jordan J. Louviere

University of South Australia - Institute for Choice ( email )

Level 13
140 Arthur Street
North Sydney, New South Wales 2060
Australia

Stephen E. Satchell

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom
44 (0)1223 335213 (Phone)
44 (0)1223 335475 (Fax)

HOME PAGE: http://www.econ.cam.ac.uk/faculty/satchell/index.h

Susan Thorp (Contact Author)

University of Sydney Business School ( email )

P.O. Box H58
Sydney, NSW 2006
Australia
+61 2 9351 6354 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Register to save articles to
your library

Register

Paper statistics

Downloads
94
rank
269,290
Abstract Views
1,335
PlumX Metrics