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Trust, financial literacy, and financial market participation

Published online by Cambridge University Press:  10 September 2021

Jill E. Fisch  and
Jason S. Seligman
Jill E. Fisch
Affiliation:
University of Pennsylvania Law School, Philadelphia, PA, USA
Jason S. Seligman*
Affiliation:
The Investment Company Institute, Washington, DC, USA
*
*Corresponding author. Email: jason.seligman@ici.org, jasonscottseligman@gmail.com
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Abstract

Willingness to participate in financial markets is important for financial well-being, including the accumulation of retirement savings through self-directed pension programs. We consider the roles of two key factors, trust and financial literacy in financial market participation. We find both are strongly related to participation. Although trust is more uniformly correlated with increases in financial market participation, the relationship between financial literacy and engagement is u-shaped, with increases in financial literacy first associated with reductions and subsequently with increases in the levels of participation. Our findings suggest trust and financial literacy play different roles and that each is related to investment behaviors in important ways.

Keywords

financial literacyfinancial market participationtrustD14G41G53
Type
Article
Information
Journal of Pension Economics & Finance , Volume 21 , Issue 4 , October 2022 , pp. 634 - 664
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press

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