Skip to main content Accessibility help
×
Home
Hostname: page-component-5bf98f6d76-xcz5z Total loading time: 0.309 Render date: 2021-04-22T03:41:38.871Z Has data issue: true Feature Flags: { "shouldUseShareProductTool": true, "shouldUseHypothesis": true, "isUnsiloEnabled": true, "metricsAbstractViews": false, "figures": false, "newCiteModal": false, "newCitedByModal": true }

What you think you know can hurt you: under/over confidence in financial knowledge and preparedness for retirement

Published online by Cambridge University Press:  30 April 2019

Marco Angrisani
Affiliation:
University of Southern California, Center for Economic and Social Research, Los Angeles, USA
Maria Casanova
Affiliation:
California State University, Fullerton, USA
Corresponding
E-mail address:

Abstract

We study whether retirement preparedness of overconfident individuals – those with high self-rated but low objective financial knowledge – and underconfident individuals – those with low self-rated but high objective financial knowledge – differs from that of individuals for whom self-assessed and actual knowledge align. We find that overconfident individuals fare no different than others with similarly low levels of objective financial knowledge in terms of retirement preparedness, while they are less interested in improving their knowledge. Underconfident individuals exhibit worse economic outcomes than others with similarly high financial knowledge but show interest in learning more about retirement. Our results suggest that accompanying financial literacy campaigns with initiatives that increase awareness of one's actual knowledge may be an effective lever to encourage the overconfident to increase their financial competence and to prove to the underconfident that they have sufficient skills to start planning their financial future.

Type
Article
Copyright
Copyright © Cambridge University Press 2019 

Access options

Get access to the full version of this content by using one of the access options below.

References

Allgood, S and Walstad, WB (2016) The effects of perceived and actual financial literacy on financial behaviors. Economic Inquiry 54, 675697.CrossRefGoogle Scholar
Angrisani, M, Kapteyn, A and Lusardi, A (2016) The National Financial Capability Study: Empirical findings from the American Life Panel survey. FINRA Report. Available at http://www.usfinancialcapability.org/downloads/NFCSALPReportFinal.pdf.Google Scholar
Barber, BM and Odean, T (2001) Boys will be boys: gender, overconfidence, and common stock investment. The Quarterly Journal of Economics 116, 261292.CrossRefGoogle Scholar
Bucher-Koenen, T, Alessie, R, Lusardi, A and van Rooij, M (2017) How financially literate are women? An overview and new insights. Journal of Consumer Affairs 51, 255283.CrossRefGoogle Scholar
Fischhoff, B, Slovic, P and Lichtenstein, S (1977) Knowing with certainty: the appropriateness of extreme confidence. Journal of Experimental Psychology: Human Perception and Performance 3, 552564.Google Scholar
Grinblatt, M and Keloharju, M (2009) Sensation seeking, overconfidence, and trading activity. Journal of Finance 64, 549578.CrossRefGoogle Scholar
Hanna, SD, Kim, KT and Chen, SC (2016) Retirement savings. In Xiao, J (ed.), Handbook of Consumer Finance Research, Chapter 3, Cham: Springer, pp. 3343.Google Scholar
Lichtenstein, S, Fischhoff, B and Phillips, LD (1977) Calibration of probabilities: The state of the art. In Jungermann, H and De Zeeuw, G (eds), Decision Making and Change in Human Affairs, vol. 16, 275324. Dordrecht: Springer.CrossRefGoogle Scholar
Lusardi, A and Mitchell, OS (2007 a) Baby boomer retirement security: the roles of planning, financial literacy, and housing wealth. Journal of Monetary Economics 1, 205224.CrossRefGoogle Scholar
Lusardi, A and Mitchell, OS (2007 b) Financial literacy and retirement preparedness: evidence and implications for financial education. Business Economics 42, 3544.CrossRefGoogle Scholar
Lusardi, A and Mitchell, OS (2011) Financial literacy and planning: Implications for retirement wellbeing. In Lusardi, A and Mitchell, OS (eds), Financial Literacy. Implications for Retirement Security and the Financial Marketplace. Oxford, UK: Oxford University Press, pp. 1739.Google Scholar
Newport, F (2018) Update: Americans' concerns about retirement persist. Available at https://news.gallup.com/poll/233861/update-americans-concerns-retirement-persist.aspx.Google Scholar
Shoven, JB, Slavov, SN and Wise, DA (2017) Social Security claiming decisions: survey evidence. NBER Working Paper 23729.CrossRefGoogle Scholar
Statman, M, Thorley, S and Vorkink, K (2006) Investor overconfidence and trading volume. Review of Financial Studies 19, 15311565.CrossRefGoogle Scholar
Van Rooij, M, Lusardi, A and Alessie, R (2012) Financial literacy, retirement planning and household wealth. The Economic Journal 122, 449478.CrossRefGoogle Scholar

Full text views

Full text views reflects PDF downloads, PDFs sent to Google Drive, Dropbox and Kindle and HTML full text views.

Total number of HTML views: 81
Total number of PDF views: 134 *
View data table for this chart

* Views captured on Cambridge Core between 30th April 2019 - 22nd April 2021. This data will be updated every 24 hours.

Send article to Kindle

To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

What you think you know can hurt you: under/over confidence in financial knowledge and preparedness for retirement
Available formats
×

Send article to Dropbox

To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

What you think you know can hurt you: under/over confidence in financial knowledge and preparedness for retirement
Available formats
×

Send article to Google Drive

To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

What you think you know can hurt you: under/over confidence in financial knowledge and preparedness for retirement
Available formats
×
×

Reply to: Submit a response


Your details


Conflicting interests

Do you have any conflicting interests? *