Financial literacy and portfolio diversification
Margarida Abreu () and
Victor Mendes ()
Quantitative Finance, 2010, vol. 10, issue 5, 515-528
We use a survey of individual investors disclosed by the Portuguese Securities Commission (CMVM) in May 2005 to study the impact of investors' levels of financial literacy on portfolio diversification. We consider distinct aspects of financial literacy, and control for socioeconomic and behavioral differences among individual groups of investors. Our results suggest that investors' educational levels and their financial knowledge have a positive impact on investor diversification. The information sources used by retail investors to gather information on markets and financial products also have a significant impact on the number of different assets included in a portfolio.
Keywords: Applied finance; Behavioral finance; Empirical finance; European financial markets (search for similar items in EconPapers)
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