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The medium is the message: learning channels, financial literacy, and stock market participation

Author

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  • Hermansson, Cecilia

    (Department of Real Estate and Construction Management, Royal Institute of Technology)

  • Jonsson, Sara

    (Stockholm University)

  • Liu, Lu

    (Stockholm University)

Abstract

This paper investigates the effects of learning channels on stock market participation. More specifically, we investigate the direct effects of learning about financial matters from one’s private network, financial advisors, and the media, as well as the interactive effects of financial literacy and these learning channels. Analyzing a unique cross-section data that combine survey data and bank register data on retail investors, we find that media are the only learning channel that increases the likelihood of stock market participation. Interactions point to the joint importance of financial literacy and media as a learning channel for individuals’ stock market participation. Constructing theme–based literacy measures, we conclude that only financial knowledge related to investments in risky assets affects stock market participation. Our findings suggest implications to policymakers when designing financial education programs.

Suggested Citation

  • Hermansson, Cecilia & Jonsson, Sara & Liu, Lu, 2021. "The medium is the message: learning channels, financial literacy, and stock market participation," Working Paper Series 21/1, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance, revised 28 Jun 2021.
    • Handle: RePEc:hhs:kthrec:2021_001
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    Cited by:

    1. Yin, Zhichao & Liu, Jiayi & Wang, Yumeng, 2023. "Fertility policy and stock market participation: Evidence from the universal two-child policy in China," International Review of Financial Analysis, Elsevier, vol. 86(C).
    2. Isidore, Renu & Arun, C. Joe, 2023. "The Moderating Effect of Financial Literacy on the Relationship Between Decision-Making Tools and Equity Returns in the Indian Secondary Equity Market," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 15(1), pages 185-211, January.

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    More about this item

    Keywords

    stock market participation; learning channels; private network; financial advisors; media; financial literacy;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy

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