Educating the uninformed: Connecting financial literacy and risky asset participation

Abstract

In this thesis, we analyse the correlation of financial literacy on the likelihood to participate and the share of wealth allocated in risky financial assets. Our dataset is the Norwegian population. An individual is financially literate when possessing a completed education or holding an occupation within the field of economics. Our main finding is that financial literacy positively correlates with both likelihood to participate and allocation in risky financial assets. We conduct additional analysis to investigate the effect of financial literacy in different wealth and age groups. Additionally, to illustrate economic significance, we show two rudimentary examples. Finally, we find financial literacy to be robust to a battery of robustness checks. The implications of our results suggest that enhancing financial literacy may contribute to balance the wealth distribution and should be considered when designing curriculums.