Financial Literacy, "Don't Know" Replies and Investor's Trading Behavior

M. Tedde

Working Paper CRENoS from Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia

Abstract: The inclination to guess rather than to admit a lack of knowledge by responding "Don't know" can explain why investors fail the surveys intended to assess their financial competence. Using MiFID test answers and trading data, we investigate whether investors who admit their ignorance and select the "Don't know" answers trade less, a!ord lower transaction costs, and achieve better (net) returns than investors who prefer to guess and select the wrong answers. Additionally, we show that among investors who fill in the MiFID test multiple times, those who select the "Don't know" answers trade less, pay lower transaction costs and perform better than the guesser investors.

Keywords: Overconfidence; Guessing; MiFID Directive; "Not Know" Replies; financial literacy; Investors Trading Behavior (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:cns:cnscwp:202601

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