Stockholding in France: the role of financial literacy and information

Abstract

We use an original household survey to study the links between stockholding, financial literacy and acquisition of financial information within the French population. Controlling for subjective expectations on stock market returns and for risk aversion, we find that stock market participation is positively related to basic financial literacy and financial information acquisition through the press reading and the family financial context during childhood. We also find that basic financial literacy is not correlated with the share of stocks in financial assets conditionally on stockownership, while the correlation with information acquisition is significant.

Keywords:

• financial literacy
• information acquisition
• stockholding puzzle

JEL Classification:

• G11
• D83

Notes

¹ Most of the missing values come from the probabilistic expectations questions which are the less easy to answer.

² See Arrondel et al. (2013) for detailed information on the financial literacy measure in the PATER survey.

³ It does not affect the other estimated coefficients.

⁴ The reverse causality issue between our basic financial literacy variable and stockholding is likely to be limited because our financial literacy indicator is mainly related to cognitive and numeracy capabilities (Christelis et al., 2010).

⁵ Jappelli and Padula (2013) argue that the stock of financial literacy early in life is a valid instrument in the regression of wealth on financial literacy.