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Does Financial Literacy Affect Stock Market Participation?

42 Pages Posted: 23 Oct 2017  

Yoshihiko Kadoya

Hiroshima University

Mostafa Khan

Graduate School of Economics, Nagoya University

Naheed Rabbani

University of Dhaka - Department of Banking

Date Written: October 20, 2017

Abstract

This study examines whether financial literacy affects stock market participation. We use data from the Preference Parameter Study, a nationwide survey in Japan, made by Osaka University. Our results show that financial literacy significantly improves stock market participation even after controlling the demographic, socio-economic, and psychological factors. The influence of financial literacy on stock market participation is robust against the measurement of financial literacy, investment in risky assets, investors’ risk aversion, and endogeneity issue. The results imply that lack of financial literacy is the reason behind people’s reluctance in stock market participation in Japan.

Keywords: Risky assets, financial literacy, household investment, Japan

JEL Classification: D1, D83, G11

Suggested Citation

Kadoya, Yoshihiko and Khan, Mostafa and Rabbani, Naheed, Does Financial Literacy Affect Stock Market Participation? (October 20, 2017). Available at SSRN: https://ssrn.com/abstract=3056562 or http://dx.doi.org/10.2139/ssrn.3056562

Yoshihiko Kadoya (Contact Author)

Hiroshima University ( email )

1-2-1 Kagamiyama
Higashi-Hiroshima, 7390047
Japan

HOME PAGE: http://home.hiroshima-u.ac.jp/ykadoya/

Mostafa Khan

Graduate School of Economics, Nagoya University ( email )

1 Furo-cho
Chikusa-ku
Nagoya, 464-8601
Japan

Naheed Rabbani

University of Dhaka - Department of Banking ( email )

Faculty of Business Studies
Shahbag
Dhaka, 1000
Bangladesh

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