Digital Finance and the Efficiency of Household Investment Portfolios

ABSTRACT

In recent years, how to increase the property income of Chinese households has aroused widespread attention. Our study focuses on the impact and impact mechanism of digital finance on household investment portfolio efficiency in China. Our study reveals that digital finance in China can promote household investment portfolio efficiency. Digital finance development mainly affects household investment efficiency by influencing financial literacy and investor sentiment. Further, we found that household wealth had an inverted U-shaped effect on the impact of digital finance on household investment efficiency. And the enhancement of households’ preference for overconsumption inhibited the impact of digital finance on household investment portfolio efficiency.

KEYWORDS:

• Digital finance
• investment portfolio
• financial literacy
• investor sentiment

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1. The author calculates based on the data of the 2017 China Household Financial Survey.

2. In recent years, China has vigorously advocated the principle that “houses are for living, not for speculating,” mainly because most households in China regard real estate as an important investment product.

3. The Sharpe ratio is calculated using data after 2003, mainly because the base date of the China Securities Composite Bond index is December 31 in 2002. And we did not use the data after 2017 for our household investment data comes from the 2017 CHFS. The cyclical rate of return ends in June 2015 is due to the abnormal fluctuations in China’s stock market after June 2015, and the China Securities Regulatory Commission has adopted various intervention measures in response to the abnormal fluctuations.

4. Our judgment based on standardized regression coefficients.

5. Because the value of the interaction term is large, we divided the original value by 10000 to construct our instrumental variable.

6. The questions are “assuming that the bank’s saving rate is 4% a year, if you deposit 100 yuan for 1 year, what can you get after 1 year?” “Supposing that the bank’s interest rate is 5% a year and the inflation rate is 3% a year. What can you buy after you deposit 100 yuan in the bank for a year?” “In general, which one do you think is riskier? Stock or fund?”

7. We minus the estimated value of the respondent’s real estates to avoid repeating problem.