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Financial literacy and household financial asset allocation: Evidence from CHFS

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  • Guan, Fuquan
  • Pan, Jialing

Abstract

With the rapid development of China’s financial markets and the diversification of financial products, financial asset investment has become an important component of household portfolios. Using data from the China Household Finance Survey (CHFS), this study constructs a financial literacy index through factor analysis and empirically examines its impact on household financial asset allocation. The results show that financial literacy has a significantly positive effect on household financial asset allocation. Specifically, higher financial literacy increases both the total amount of household financial assets and their share in total assets, it also raises the proportion of risky financial assets, as well as the likelihood and variety of risky asset holdings, with a stronger impact on risky assets. Heterogeneity analysis reveals that the impact of financial literacy on household financial asset allocation is substantially greater in rural areas than in urban areas, whereas its impact on risky asset allocation is weaker in rural areas. This study contributes to the measurement of financial literacy and enhances the understanding of the factors influencing household financial asset allocation.

Suggested Citation

  • Guan, Fuquan & Pan, Jialing, 2026. "Financial literacy and household financial asset allocation: Evidence from CHFS," Finance Research Letters, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:finlet:v:101:y:2026:i:c:s154461232600601x
    DOI: 10.1016/j.frl.2026.110072
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