Financial Literacy Overconfidence and Stock Market Participation

Stock market participation is considered as an indicator of consumer financial well-being. This study examined the association between financial literacy overconfidence and stock market participation. Financial literacy overconfidence was measured by the difference between an individual's subjective and objective financial literacy scores. Data from the 2012 Chinese Survey of Consumer Finance was analyzed. The results showed that financial literacy overconfidence is positively correlated with stock market participation. On the other hand, under-confidence is negatively correlated to stock market participation. This study contributes to the existing literature by relating a unique factor, financial literacy overconfidence, to stock market participation.