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The Heterogeneous Relationship Between Financial Education and Investment Behavior in Japan

Author

Listed:
  • Hiroko Araki

    (Faculty of Economics Keio University)

  • Juan Nelson Martinez Dahbura

    (Data Scientist)

Abstract

This research employs data from Japan to study the relationship between the experience of financial education and the participation of Japanese persons on financial markets. We account for unobserved heterogeneity by employing a three-class Finite Mixture Model. The prior probability of class membership is a function of sociodemographic characteristics of the person. We examine the association between the investment experience probability conditional on class membership, and the experience of financial education at home, school and the workplace, controlling for a financial literacy score measured through Item Response Theory, and several behavioral traits. The results allow us to extract a segment of striving persons whose investment behavior differs in important ways from other groups. Education at school or work is significantly associated with higher investment probabilities across all classes of individuals. The impact of financial education at home is more heterogeneous, and may be negative for the most fragile groups. We believe that our results may offer important insights for policy-makers involved in the design of financial education programs.

Suggested Citation

  • Hiroko Araki & Juan Nelson Martinez Dahbura, 2021. "The Heterogeneous Relationship Between Financial Education and Investment Behavior in Japan," Keio-IES Discussion Paper Series 2021-018, Institute for Economics Studies, Keio University.
    • Handle: RePEc:keo:dpaper:2021-018
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    File URL: https://ies.keio.ac.jp/upload/DP2021-018_EN.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Personal Financial Decision; Financial Education; Financial Literacy; Finite Mixture Model;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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