Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/126584
Authors: 
Bannier, Christina E.
Neubert, Milena
Year of Publication: 
2016
Series/Report no.: 
CFS Working Paper Series 528
Abstract: 
This study examines the role of actual and perceived financial sophistication (i.e., financial literacy and confidence) for individuals' wealth accumulation. Using survey data from the German SAVE initiative, we find strong gender- and education-related differences in the distribution of the two variables and their effects on wealth: As financial literacy rises in formal education, whereas confidence increases in education for men but decreases for women, we observe that women become strongly underconfident with higher education, while men remain overconfident. Regarding wealth accumulation, we show that financial literacy has a positive effect that is stronger for women than for men and that is increasing (decreasing) in education for women (men). Confidence, however, supports only highly-educated men's wealth. When considering different channels for wealth accumulation, we observe that financial literacy is more important for current financial market participation, whereas confidence is more strongly associated with future-oriented financial planning. Overall, we demonstrate that highly-educated men's wealth levels benefit from their overconfidence via all financial decisions considered, but highly-educated women's financial planning suffers from their underconfidence. This may impair their wealth levels in old age.
Subjects: 
financial literacy
financial sophistication
confidence
wealth
household finance
behavioral finance
gender
formal education
JEL: 
D91
G11
D83
J26
Document Type: 
Working Paper

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