The Heterogeneous Relationship Between Financial Education and Investment Behavior in Japan

Hiroko Araki and Juan Martinez Dahbura
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Hiroko Araki: Faculty of Economics Keio University
Juan Martinez Dahbura: Data Scientist

No 2021-018, Keio-IES Discussion Paper Series from Institute for Economics Studies, Keio University

Abstract: This research employs data from Japan to study the relationship between the experience of financial education and the participation of Japanese persons on financial markets. We account for unobserved heterogeneity by employing a three-class Finite Mixture Model. The prior probability of class membership is a function of sociodemographic characteristics of the person. We examine the association between the investment experience probability conditional on class membership, and the experience of financial education at home, school and the workplace, controlling for a financial literacy score measured through Item Response Theory, and several behavioral traits. The results allow us to extract a segment of striving persons whose investment behavior differs in important ways from other groups. Education at school or work is significantly associated with higher investment probabilities across all classes of individuals. The impact of financial education at home is more heterogeneous, and may be negative for the most fragile groups. We believe that our results may offer important insights for policy-makers involved in the design of financial education programs.

Keywords: Personal Financial Decision; Financial Education; Financial Literacy; Finite Mixture Model (search for similar items in EconPapers)
JEL-codes: D14 G02 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2021-09-03
New Economics Papers: this item is included in nep-edu, nep-fdg and nep-fle
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