This paper studies the factors that determine the financial literacy level of the Portuguese individual investors and explores the relation between financial literacy and financial behavior, particularly portfolio diversification. Our results suggest that the average financial literacy level of Portuguese individual investors is low: two in three investors reveal an insufficient level of financial knowledge. We also find that the investor with a high literacy level is a married man, about 44 years old, living in the coast or in the Oporto region, and is an independent worker. Moreover, our results show that the level of financial literacy has a strong impact on portfolio diversification behavior, in different ways. In fact, academic degree, specific financial culture, and information sources are relevant variables for the explanation of individual financial decisions.
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Paper provided by Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon. in its series Working Papers with number
2006/10.
Length: Date of creation: 2006 Date of revision: Handle: RePEc:ise:isegwp:wp102006
Contact details of provider: Postal: Department of Economics, School of Economics and Management (ISEG), Technical University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL Web page: http://www.iseg.utl.pt/departamentos/economia/
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