Financial Competence and Expectations Formation: Evidence from Australia

25 Pages Posted: 24 Feb 2012

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

Susan Thorp

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

Stephen E. Satchell

University of Cambridge - Faculty of Economics and Politics

Multiple version iconThere are 4 versions of this paper

Date Written: March 2012

Abstract

We study the financial competence of Australian retirement savers using self‐assessed and quantified measures. Responses to financial literacy questions show large variation and compare poorly with some international surveys. Basic and sophisticated financial literacy vary significantly with most demographics, self‐assessed financial competence, income, superannuation accumulation and net worth. General numeracy scores are largely constant across gender, age, higher education and income. Financial competence also significantly affects expectations of stock market performance. Using a discrete choice model, we show that individuals with a higher understanding of risk, diversification and financial assets are more likely to assign a probability to future financial crises rather than expressing uncertainty.

JEL Classification: G23, G28, D14

Suggested Citation

Bateman, Hazel and Eckert, Christine and Geweke, John and Louviere, Jordan J. and Thorp, Susan and Satchell, Stephen E., Financial Competence and Expectations Formation: Evidence from Australia (March 2012). Economic Record, Vol. 88, Issue 280, pp. 39-63, 2012. Available at SSRN: https://ssrn.com/abstract=2010309 or http://dx.doi.org/10.1111/j.1475-4932.2011.00766.x

Hazel Bateman (Contact Author)

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

Susan Thorp

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

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

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