Measuring the Financial Sophistication of Households

Laurent Calvet, John Campbell and Paolo Sodini

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Abstract: This paper constructs an index of financial sophistication that, in comprehensive data on Swedish households, best explains a set of three investment mistakes: underdiversification, risky share inertia, and the tendency to sell winning stocks and hold losing stocks (the disposition effect). The index of financial sophistication increases strongly with financial wealth and household size, and to a lesser extent with education and proxies for financial experience. The index is strongly positively correlated with the share of risky assets held by a household.

Keywords: Households; Financial Sophistication (search for similar items in EconPapers)
Date: 2009-05
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Citations: View citations in EconPapers (181)

Published in American Economic Review, 2009, Vol.99,n°2, pp.393-398. ⟨10.1257/aer.99.2.393⟩

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Related works:
Journal Article: Measuring the Financial Sophistication of Households (2009)
Working Paper: Measuring the Financial Sophistication of Households (2009)
Working Paper: Measuring the Financial Sophistication of Households (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00459687

DOI: 10.1257/aer.99.2.393

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