Fearless Woman: Financial Literacy, Confidence, and Stock Market Participation

Women are less financially literate than men, and it has been difficult to determine whether this gap reflects a lack of knowledge or, rather, a lack of confidence. To address this important research question, we designed two survey modules that enable us to calculate the extent to which confidence matters for both financial literacy and behavior. We developed and estimated a model that provides a new measure of financial literacy and disentangles confidence from knowledge. We find that confidence accounts for about 30% of the gender difference in financial literacy. Moreover, both financial knowledge and confidence are linked to stock market participation. We also provide researchers with a method to account for confidence in regressions. This paper was accepted by Bo Becker, finance. Funding: This work was supported by the European Investment Bank Institute (n/a), which is gratefully acknowledged. The findings and views presented in this article are entirely those of the authors and should not be attributed in any manner to the European Investment Bank or its Institute or to the European Central Bank, the Eurosystem, or De Nederlandsche Bank. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.00425 .