FINANCIAL LITERACY AND PORTFOLIO DIVERSIFICATION: THE ROLE OF MODERATORS

• Published in: Journal of economics and economic education research 2021-05, Vol.22 (2), p.1-27
• Main Authors: Malekpour, Mehdi, Fazlzadeh, Alireza, Jabarzadeh, Younis
• Format: Article
• Language: English
• Subjects: Compound interest; Decision making; Definitions; Dictionaries; Diversification; Financial literacy; Financial Problems; Investments; Investor behavior; Knowledge; Literacy; Literature reviews; Performance Based Assessment; Portfolio diversification; Questionnaires; Reading Ability; Regression analysis; Researchers; Securities markets; Self evaluation; Sociodemographics; Stock exchanges; Writing Ability
• ISSN: 1533-3604; 1533-3590

In this paper, we have focused on financial literacy as the primary predictor of portfolio diversification in investors. In contrast to other similar studies which use socio-demographic variables as control, we used socio-demographic variables as moderating variables. We have used multiple regressions to analyze the model. Results show that although financial literacy is an acceptable predictor of portfolio diversification (R Squared = 0.122; p < .01), importing moderating variables improves the model significantly (R Squared = 0.868; p < .01). Financial education of investors according to their group differences is the main suggestion we have proposed in this paper. Between group differences, such as differences in gender and age groups, suggest that focusing on investors' financial educations must be different according to their groups. In the end, as a separate part in appendix, we have collected a comprehensive review of financial literacy definitions and measurement methods, introduced by different researchers which were necessary in this field.