- The Effect of Negative Equity on Mortgage Default: Evidence from HAMP PRA, Therese C. Scharlemann & Stephen H. Shore, Office of Financial Research Working Paper No. 15-06.
- Housing Tax Reform and Foreclosure Rates, Richard Dusansky & Firas Zebian, Journal of Real Estate Finance and Economics, Vol. 51, No. 3, 2015.
- Price Jump Risk in the US Housing Market, Robert I. Webb, Jian Yang & Jin Zhang, Journal of Real Estate Finance and Economics, 2015 Forthcoming.
- Statutory Right of Redemption and the Selling Price of Foreclosed Houses, Bruce L. Gordon & Daniel T. Winkler, Journal of Real Estate Finance and Economics, Vol. 51, No. 3, 2015.
- Revealing the Rapist Next Door: Property Impacts of the Sex Offender Registry, Susan Yeh, International Review of Law and Economics, Forthcoming; George Mason Legal Studies Research Paper No. LS 15-06; George Mason Law & Economics Research Paper No. 15-24.
- An Investigation into Sentiment-Induced Institutional Trading Behavior and Asset Pricing in the REIT Market, Prashant Das, Julia Freybote & Gianluca Marcato, Journal of Real Estate Finance and Economics, Vol. 51, No. 2, 2015.
- Leveraged Bubbles, Oscar Jorda, Moritz Schularick & Alan M. Taylor, CEPR Discussion Paper No. DP10781.
Tag Archives: asset pricing
Who Knows The ABCs of Finance?
Annamaria Lusardi recently posted a working paper, Financial Literacy: Do People Know the ABCs of FInance? to SSRN. The abstract reads,
Increasingly, individuals are in charge of their own financial security and are confronted with ever more complex financial instruments. However, there is evidence that many individuals are not well-equipped to make sound saving decisions. This paper looks at financial literacy, which is defined as the ability to process economic information and make informed decisions about financial planning, wealth accumulation, debt, and pensions. Failure to plan for retirement, lack of participation in the stock market, and poor borrowing behavior can all be linked to ignorance of basic financial concepts. Financial literacy impacts financial decision-making, with implications that apply to individuals, communities, countries, and society as a whole. Given the lack of financial literacy among the population, it may be important to remedy it by adding financial literacy to the school curriculum.
As I have stated previously, not only is financial literacy in bad shape, but efforts to improve it have not proven to be very effective. Lusardi’s paper has some sobering findings:
most individuals in the United States and in other countries cannot
perform simple calculations and do not understand basic financial concepts such as interest compounding, the difference between nominal and real values, and risk diversification. Knowledge of more complex concepts, such as the difference between bonds and stocks, the workings of mutual funds, and basic asset pricing, is even scarcer. Financial illiteracy is widespread among the general population and particularly acute among specific demographic groups, such as women, the young and the old, and those with low educational attainment. (3)
Because evidence does not demonstrate that additional financial education is all that effective, I take a different lesson from Lusardi’s review of survey results. The government should take an active role in regulating financial markets to protect consumers from abusive behavior and to encourage them to make good financial decisions. Financial education is no replacement for consumer protection.
