Financial literacy and participation in the derivatives markets

Yu Jen Hsiao, Wei Che Tsai

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

We set out in this study to determine whether individuals with higher levels of financial literacy are more likely to be active participants in the derivatives markets. Our empirical results, based upon an official National Survey undertaken by the Financial Supervisory Commission of Taiwan, reveal that even after controlling for stock market participation rates, financial literacy represents a significant benefit to individuals since it helps them to lower the entry barriers to purchasing complex derivatives products. We also find that household wealth, gender, residential location and diverse sources of information have significant effects on participation rates in the derivatives markets. Furthermore, when taking into consideration issues of accessibility or measurement error, the positive effects of financial literacy on derivatives market participation are found to remain largely unchanged.

Original languageEnglish
Pages (from-to)15-29
Number of pages15
JournalJournal of Banking and Finance
Volume88
DOIs
Publication statusPublished - Mar 1 2018

Fingerprint

Financial literacy
Derivative markets
Financial participation
Participation rate
Household wealth
Sources of information
Empirical results
Accessibility
Barriers to entry
Measurement error
Stock market participation
Residential location
Market participation
Taiwan
Purchasing
Derivatives

Keywords

  • Derivatives market participation
  • Financial literacy
  • Household finance

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Financial literacy and participation in the derivatives markets. / Hsiao, Yu Jen; Tsai, Wei Che.

In: Journal of Banking and Finance, Vol. 88, 01.03.2018, p. 15-29.

Research output: Contribution to journalArticle

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