Abstract: Women are less financially literate than men. It is unclear whether this gap reflects a lack of knowledge or, rather, a lack of confidence. Our survey experiment shows that women tend to disproportionately respond “do not know” to questions measuring financial knowledge, but when this response option is unavailable, they often choose the correct answer. We estimate a latent class model and predict the probability that respondents truly know the correct answers. We find that about one-third of the financial literacy gender gap can be explained by women’s lower confidence levels. Both financial knowledge and confidence explain stock market participation.
Tabea Bucher-Koenen holds the Chair of Financial Markets at the University of Mannheim. She is also the head of the ZEW Research Department International Finance and Financial Management. Her research focuses on household finance, the economics of ageing, and demographic change.
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