Investment Experience, Financial Literacy, and Investment-Related Judgments

48 Pages Posted: 19 Apr 2014 Last revised: 26 Apr 2018

See all articles by Susan D. Krische

Susan D. Krische

American University - Kogod School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2018

Abstract

This research examines how investment experience and financial literacy impact investment-related judgments. Financial literacy refers to a person’s knowledge of fundamental financial concepts. I begin by documenting investors’ demographic characteristics and financial literacy using a relatively large sample of participants (n>2,000) recruited from Amazon’s Mechanical Turk under different categories of investment experience, which I benchmark against national samples of financial capability skills in the United States. I then replicate a sample of three accounting research experiments, varying the type and depth of the underlying accounting issue. Across the three experiments, the data show two main results: First, investment experience strengthens the influence of financial accounting disclosures on participants’ investment-related judgments. Second, financial literacy further strengthens the influence of financial accounting disclosures on investors’ (but not non-investors’) judgments. Collectively, these findings suggest that investment experience and financial literacy can help to identify individuals who are more likely able and willing to study financial reporting information with reasonable diligence as they form their investment-related judgments.

Keywords: financial literacy; individual investor; Amazon Mechanical Turk (MTurk)

JEL Classification: M49; I29; G19

Suggested Citation

Krische, Susan D., Investment Experience, Financial Literacy, and Investment-Related Judgments (March 1, 2018). Available at SSRN: https://ssrn.com/abstract=2426570 or http://dx.doi.org/10.2139/ssrn.2426570

Susan D. Krische (Contact Author)

American University - Kogod School of Business ( email )

4400 Massachusetts Ave NW
Washington, DC 20016
United States
202-885-2082 (Phone)
202-885-1992 (Fax)

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