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The Role of Cognitive Characteristics, Personality Traits, and Financial Literacy in Financial Decision Making

In: Financial Decisions of Households and Financial Inclusion: Evidence for Latin America and the Caribbean

Author

Listed:
  • María José Roa

    (Centro de Estudios Monetarios Latinoamericanos)

  • Ignacio Garrón

    (Banco Central de Bolivia)

  • Jonathan Barboza

    (Centro de Estudios Monetarios Latinoamericanos)

Abstract

The aim of this study is to analyze the relation between cognitive characteristics, personality traits, and financial literacy in savings and credit financial decision making, as well as participation in the formal financial sector. Our analysis is based on the Financial Capabilities Survey, which was applied in four countries of the Andean region: Bolivia, Colombia, Ecuador, and Peru. The empirical analysis shows the importance of numerical abilities and personality traits associated with conscientiousness on the tendency to save and participate in formal financial markets. The results of our instrumental variable analysis demonstrate that the role of financial literacy may be greater in more complex decisions or decisions that require more information, such as involving the use of credit, than for simpler decisions such as holding a basic savings account.

Suggested Citation

  • María José Roa & Ignacio Garrón & Jonathan Barboza, 2018. "The Role of Cognitive Characteristics, Personality Traits, and Financial Literacy in Financial Decision Making," Investigación Conjunta-Joint Research, in: María José Roa García & Diana Mejía (ed.), Financial Decisions of Households and Financial Inclusion: Evidence for Latin America and the Caribbean, edition 1, volume 1, chapter 7, pages 193-244, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
    • Handle: RePEc:cml:incocp:7en-07
    Note: Joint Research Program of the Central Bank Researchers Network
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • I20 - Health, Education, and Welfare - - Education - - - General
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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