Financial Literacy, Naive Diversification, and Security Selection
Journal of Applied Financial Research, 1, 69-86 (2019)
21 Pages Posted: 15 Jun 2021
Date Written: 2019
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: Suggested Citation