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Confidence mediates how investment knowledge influences investing self-efficacy

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  • Forbes, James
  • Kara, S. Murat
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    Abstract

    A comprehensive investment literacy questionnaire surveyed potential sources (viz., knowledge, confidence) of investing self-efficacy in a large sample of working adults. As expected, the effect of investment knowledge on belief in one's future capability of orchestrating a plan to achieve investment goals was mediated by confidence. Overall, employees' applied investment knowledge accuracy was low: 57%. In general, investment knowledge was reliably related to confidence. However, confidence and investment knowledge accuracy were completely independent for 9 of 21 items, implying an inability to inhibit poor investment decisions or an inability to exploit investment opportunities. A policy of required investment training could be implemented so as to not impede individuals' freedom of choice, which would likely help the truly uninformed to become more informed and ultimately successful investors.

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    Article provided by Elsevier in its journal Journal of Economic Psychology.

    Volume (Year): 31 (2010)
    Issue (Month): 3 (June)
    Pages: 435-443

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    Handle: RePEc:eee:joepsy:v:31:y:2010:i:3:p:435-443
    Contact details of provider: Web page: http://www.elsevier.com/locate/joep

    Keywords: Knowledge Confidence Investing self-efficacy Investor education;

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    Cited by:

    1. Margarida Abreu & Victor Mendes, 2011. "Information, Overconfidence and Trading: Do the Sources of Information Matter?," Working Papers Department of Economics 2011/25, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
    2. Muehlfeld, Katrin & Weitzel, Utz & van Witteloostuijn, Arjen, 2013. "Fight or freeze? Individual differences in investors’ motivational systems and trading in experimental asset markets," Journal of Economic Psychology, Elsevier, vol. 34(C), pages 195-209.
    3. K.S. Muehlfeld & G.U. Weitzel & A. van Witteloostuijn, 2012. "Fight or freeze? Individual differences in investors’ motivational systems and trading in experimental asset markets," Working Papers 12-18, Utrecht School of Economics.

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