It was found that investors who received financial education obtained high investment performance through active investment even in crisis situations.
The Bank of Korea published the results of this study in the “Report on the Effect of Financial Understanding on Investment Behavior” released on the 25th. The BOK explained that the importance of financial understanding was emphasized in terms of efficient investment and protection of financial consumers.
The report explained the background of the study, “There was a lack of rigorous research on whether financial comprehension has the same effect as usual even in a situation of high fear in the financial market, such as the 2008 global financial crisis.” The BOK used fund investor survey data between 2007 and 2016 to analyze the effect of financial literacy on fund investment behavior in a situation where individual characteristics, income, and asset status were controlled.
As a result of the survey, it was found that in normal times (2009-2016), both objective fund knowledge and subjective fund knowledge had a significant effect on fund market participation and investment expansion. Both types of fund knowledge had positive effects on the number of investment funds, fund investment size, fund investment ratio among financial assets, and investment return.
However, in the context of the financial crisis, groups with high both objective and subjective knowledge actively participated in investment, and it was found that there was a high possibility of earning a return on investment. The report said, “Unlike usual, significant investment expansion was revealed only when confidence in investment (subjective knowledge) was added with a fairly high level of objective knowledge in advance, unlike usual,” the report said. It was found that the overconfident group who actively participated in fund investment showed a passive attitude toward investment in crisis situations.
The BOK said, “In a crisis situation where financial products are frequently undervalued, active investment was possible for groups with a high level of subjective knowledge as well as objective knowledge, which led to high investment performance. It has been confirmed that by making this possible, it can have a positive effect on individual investment performance.”
A BOK official said, “Reinforcing financial education in regular education courses and public institutions and financial institutions suggests that individuals can induce efficient investment behavior and contribute to stabilizing the financial market by suppressing excessive withdrawal of individual investment funds in times of crisis. “He said.
Reporter Lim Dae-hwan
