Investment Literacy, Overconfidence and Cryptocurrency Investment

Abstract

Cryptocurrency has been increasingly popular with investors in US financial market. Using the 2018 National Financial Capability Study Investor survey, this study examined the association between investment literacy and cryptocurrency investment. About 13% of investors invested in cryptocurrency directly or indirectly. Results from regression analyses show that objective investment literacy was negatively while subjective literacy was positively associated with holding cryptocurrency. Overconfident investors were more likely to invest in cryptocurrency, and results were robust across three overconfidence measures. This study has implications for investment advice, financial education and research.

Keywords: Investment literacy, financial knowledge, overconfidence, investment, cryptocurrency

JEL Classification: G5, G11, G53