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Financial literacy and portfolio diversification

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Listed:
  • Margarida Abreu
  • Victor Mendes

Abstract

We use a survey of individual investors disclosed by the Portuguese Securities Commission (CMVM) in May 2005 to study the impact of investors' levels of financial literacy on portfolio diversification. We consider distinct aspects of financial literacy, and control for socioeconomic and behavioral differences among individual groups of investors. Our results suggest that investors' educational levels and their financial knowledge have a positive impact on investor diversification. The information sources used by retail investors to gather information on markets and financial products also have a significant impact on the number of different assets included in a portfolio.

Suggested Citation

  • Margarida Abreu & Victor Mendes, 2010. "Financial literacy and portfolio diversification," Quantitative Finance, Taylor & Francis Journals, vol. 10(5), pages 515-528.
    • Handle: RePEc:taf:quantf:v:10:y:2010:i:5:p:515-528
    DOI: 10.1080/14697680902878105
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    References listed on IDEAS

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