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Financial Literacy and Savings Account Returns

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  • Deuflhard, Florian
  • Georgarakos, Dimitris
  • Inderst, Roman

Abstract

Savings accounts are owned by most households, but little is known about the performance of households’ investments. We create a unique dataset by matching information on individual savings accounts from the DNB Household Survey with market data on account-specific interest rates and characteristics. We document considerable heterogeneity in returns across households, which can be partly explained by financial sophistication. A one-standard deviation increase in financial literacy is associated with a 13% increase compared to the median interest rate. We isolate the usage of modern technology (online accounts) as one channel through which financial literacy has a positive association with returns.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9882.

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Date of creation: Mar 2014
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Handle: RePEc:cpr:ceprdp:9882

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Keywords: Financial literacy; Household finance; Interest rates; Savings accounts;

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  1. Maarten van Rooij & Annamaria Lusardi & Rob Alessi, 2007. "Financial literacy and stock market participation," DNB Working Papers 146, Netherlands Central Bank, Research Department.
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  19. Yannis Bilias & Dimitris Georgarakos & Michael Haliassos, 2010. "Portfolio Inertia and Stock Market Fluctuations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(4), pages 715-742, 06.
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