Financial Literacy, Naive Diversification, and Security Selection

Journal of Applied Financial Research, 1, 69-86 (2019)

21 Pages Posted: 15 Jun 2021

See all articles by Thomas A. Hanson

Thomas A. Hanson

Butler University - Lacy School of Business

Jenna Kalthoff

Minnesota State University Moorhead

Date Written: 2019

Abstract

Low levels of financial literacy have been linked to costly errors in investing behavior. This paper examines the relationship between financial literacy and the two financial tasks of asset allocation and security selection in an online survey of college students. Results suggest that financial literacy can slightly attenuate the naïve diversification bias and improve security selection decisions. The results support educational efforts to increase financial literacy to improve retirement savings and financial decisions.

Keywords: Financial literacy, asset allocation, naive diversification, security selection

JEL Classification: G11, G41

Suggested Citation

Hanson, Thomas A. and Kalthoff, Jenna, Financial Literacy, Naive Diversification, and Security Selection (2019). Journal of Applied Financial Research, 1, 69-86 (2019), Available at SSRN: https://ssrn.com/abstract=3860428

Thomas A. Hanson (Contact Author)

Butler University - Lacy School of Business ( email )

4600 Sunset Avenue
Indianapolis, IN 46208
United States

Jenna Kalthoff

Minnesota State University Moorhead

Moorhead, MN 56563
United States

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