Research On The Impact Of Financial Literacy On The Efficiency Of Financial Asset Allocation Of Chinese Households

In 2020,China’s fight against poverty has won a comprehensive victory.Under the current standards,absolute poverty has been eliminated as a whole,the living standard of residents has been significantly improved,and a new journey towards common prosperity has begun.The key to achieving common prosperity is to improve the income level of residents,among which stabilizing and increasing family property income is one of the important ways for residents to share the dividends of China’s rapid economic development.However,at present,the absolute number of property income of Chinese residents is not high.In 2021,the per capita net property income will be 3227 yuan,accounting for only 8.7% of the disposable income.There is still room for improvement.Under this background,it is of practical significance to explore the impact of financial literacy on the efficiency of household financial asset allocation in China.On the one hand,it can further understand the current situation and characteristics of household financial asset allocation in China,and on the other hand,it can also provide a new idea for improving the efficiency of household financial asset allocation and provide reference for the development direction of China’s financial market.Based on the data of China’s household financial survey in 2015,2017 and 2019,this paper uses the Sharp ratio as the proxy indicator of the efficiency of financial asset allocation,carries out statistical analysis on subjective and objective financial literacy and the efficiency of household financial asset allocation,and uses the Heckman two-stage modified model to empirically test the impact of subjective and objective financial literacy on the efficiency of household financial asset allocation,Then the empirical conclusions are tested for endogeneity and robustness.In addition,in order to explore the impact of financial literacy on the efficiency of household financial asset allocation among different groups with different characteristics,this paper also conducted a heterogeneity analysis from four aspects: urban and rural household registration,asset size,age,and region.The conclusions of the study are as follows:(1)There is a lack of diversity in the allocation of financial assets for Chinese households.The proportion of households with one or two financial assets is 75.1%,and the proportion of households with five or more financial assets is only 0.9%.At the same time,there is a large gap between the efficiency of financial asset allocation between urban and rural households in China,and the efficiency of financial asset allocation of urban households is 8.34 times that of rural households;(2)The level of financial literacy of Chinese residents is low,and the proportion of families who can correctly answer the three questions of interest rate calculation,inflation and investment risk is only2.30%;(3)Both subjective and objective financial literacy have a significant positive effect on the efficiency of financial asset allocation of Chinese households,that is,the higher the level of financial literacy of residents,the higher the efficiency of financial asset allocation of their households;(4)The impact of financial literacy on the financial allocation efficiency of families with different characteristics is different.From the perspective of the scale of total household assets,the promotion of financial literacy on the efficiency of financial asset allocation increases with the increase of total household assets.From the perspective of urban and rural areas,compared with rural families,the promotion of financial literacy on the efficiency of financial asset allocation is stronger in urban families.From the perspective of residents’ age,with the growth of residents’ age,the promotion of financial literacy on the efficiency of financial asset allocation shows the characteristics of first increasing and then weakening.From the regional perspective,financial literacy has a more obvious role in promoting the efficiency of household financial asset allocation of residents in the eastern region,and the weakest role in promoting the efficiency of household financial asset allocation of residents in the western region.Based on the above conclusions,this paper puts forward the following policy recommendations: First,improve the investment environment of the financial market and protect the rights and interests of individual investors;The second is to improve residents’ financial literacy level and make reasonable use of the financial market to improve property income;Third,innovate financial products for different groups and enrich investors’ choices;Fourth,expand the coverage of inclusive finance and deepen the penetration of financial services.