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The impact of self-efficacy on wealth accumulation and portfolio choice

  • S. Chatterjee
  • M. Finke
  • N. Harness

Self-efficacy is a psychological construct based on the evaluations of one's ability to accomplish certain behaviours or achieve certain outcomes (Bandura, 1977). Although self-efficacy has been linked to health, task accomplishment, greater socio-economic status and income (Seeman and Seeman, 1983; Stretcher et al., 1986; Gecas and Seff, 1990; Judge et al., 2002; Zagorsky, 2007), there has been no study that investigates whether self-efficacy is also a predictor of greater wealth creation over a specific period of time. Applying a theoretical framework based on self-efficacy, this article investigates household financial behaviours using the National Longitudinal Survey of Youth (NLSY79) data-set. For the purpose of this study, change in wealth across time and financial market participation is modelled as a function of socio-economic and demographic variables drawn from prior literature. Findings from this research reveal that self-efficacy is indeed a predictor of investment for financial assets and is also a predictor of wealth creation across time.

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Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 18 (2011)
Issue (Month): 7 ()
Pages: 627-631

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Handle: RePEc:taf:apeclt:v:18:y:2011:i:7:p:627-631
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