Financial Literacy And Household Investment Performance

At present,financial innovations centered on science and technology emerges continuously through various ways,which propels the development of financial market,promotes the diversification of financial products,and meets the diversified needs of households in asset allocation.This should help to optimize the allocation of household assets and improve the investment performance of households in China.However,according to the data of China Household Finance Survey in 2013,the investment performance of Chinese households is not optimistic.Why does not the development of financial markets and the diversification of financial products contribute to the improvement of household investment performance? This may be related to the lack of household financial literacy.If our households lack basic financial literacy and do not understand the risks behind various financial products,coupled with the inherent information asymmetry characteristics of financial markets,it is easy to lead to household investment decision-making errors.investment performance naturally cannot get improvement.Therefore,the question raised in this paper is that in the process of the development of China’s financial markets,is the low level of household financial literacy an important reason for poor investment performance?In order to analyze the effect and mechanism of financial literacy on household investment performance,this paper conducts research from theoretical,current situation and empirical perspectives.In the theoretical analysis,the model of household investment decision-making is constructed,and the corresponding hypothesis is put forward according to the results of theoretical model deduction.In the current situation analysis,using the data of China Household Finance Survey in 2013,this paper introduces the present situation of household financial literacy and investment performance in China from aspects of whole and heterogeneity.In the empirical analysis,the entropy method is used to construct the financial literacy index.In order to test the hypothesis which is put forward in the theoretical part of this paper,we use sortino ratio to measure household investment performance directly,and study the impact of financial literacy on household participation in risky market and household investment performance respectively.Our findings are as follows: Firstly,financial literacy has a positive effect on household investment performance.This means that the higher the financial literacy is,the better the performance of household portfolio.Secondly,financial literacy positively affects household participation in the stock,fund and bond markets,but negativelycorrelates with household participation in the real estate market.Thirdly,the allocation of financial assets in Chinese households is dominated by risk-free assets,and household participation in the risky market is insufficient.At the same time,there is a phenomenon of over-allocation in real estate market.Fourthly,on the one hand,household financial literacy and investment performance are at a very low level as a whole in China.On the other hand,there are some heterogeneity in education level of the householder,household income,urban-rural areas and regions.In order to improve Chinese household financial literacy and investment performance,the government should establish a long-term mechanism of financial literacy education and systematically promote financial universal education.At the same time,the government should carry out targeted financial education for special groups and optimize the investment environment.Financial institutions should strive to improve their sense of social responsibility,and accelerate financial innovation to meet the multi-level financial needs of financial consumers.Family members should have a good learning attitude,and actively master some basic financial knowledge through the Internet,offline consulting and other ways.