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- 28 February 2011
- WORKING PAPER SERIES - No. 1299Details
- We study how and to what extent private households are affected by the recent financial crisis and how their financial decisions are influenced by this shock. Our analysis reveals that individuals with low levels of financial literacy are less likely to have invested in the stock market and thus are less likely to report losses in wealth. Yet, individuals with low financial literacy are more likely to sell their assets which lost in value (realize losses). This reaction to short-term losses has potential long-term consequences if individuals do not participate in markets' recovery and face lower returns in the long run.
- JEL Code
- D91 : Microeconomics→Intertemporal Choice→Intertemporal Household Choice, Life Cycle Models and Saving
D14 : Microeconomics→Household Behavior and Family Economics→Household Saving; Personal Finance
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
- Conference on household finance and consumption