Whom to Educate? Financial Literacy and Investor Awareness

China Economic Review, 67, 101608

39 Pages Posted: 18 Jun 2020 Last revised: 17 Aug 2021

See all articles by Zhengqing Gui

Zhengqing Gui

Wuhan University - Economics and Management School

Yangguang Huang

Hong Kong University of Science & Technology (HKUST) - Department of Economics

Xiaojian Zhao

Monash University - Department of Economics

Date Written: March 2, 2021

Abstract

We conducted an experiment and survey in Shenzhen, China, to measure individuals' risk preferences, financial literacy, and the effect of a financial education program. A proportion of individuals may be unaware of the high risk associated with a high-return financial product and thus may purchase financial products inconsistent with their risk attitudes. Participating in our education program significantly reduced individuals' tendency to hypothetically invest in high-risk products, especially for those who are risk-averse. Therefore, rather than randomly assigning the education program to investors, we suggest that risk-averse investors be targeted. We find that the responses to standard financial literacy questions are not related to individuals' awareness of the link between high risk and high return, calling for a newly designed question of financial literacy as proposed in our study.

Keywords: Financial literacy, financial education, unawareness, China

JEL Classification: D14, G11, I20

Suggested Citation

Gui, Zhengqing and Huang, Yangguang and Zhao, Xiaojian, Whom to Educate? Financial Literacy and Investor Awareness (March 2, 2021). China Economic Review, 67, 101608, Available at SSRN: https://ssrn.com/abstract=3597342 or http://dx.doi.org/10.2139/ssrn.3597342

Zhengqing Gui (Contact Author)

Wuhan University - Economics and Management School ( email )

Hubei
China

Yangguang Huang

Hong Kong University of Science & Technology (HKUST) - Department of Economics ( email )

Clear Water Bay
Kowloon, Hong Kong
China

Xiaojian Zhao

Monash University - Department of Economics ( email )

Australia

HOME PAGE: http://https://sites.google.com/site/xjzhao81/

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