A LITERATURE REVIEW ON FINANCIAL LITERACY
Based on prior research, this paper provides insights regarding financial literacy. Amidst this research,
some similarities and contrarinesses have been manifested by juxtaposing this literature in terms of (1)
definitional issues on financial literacy, (2) its probable endegoeneity, (3) its determinants and consequences
established by the extant research, (4)other probable estimators of financial decision making which would
individually make differences aside from financial literacy, (5)manner of measuring it (i.e., subjectiveobjective
measures versus proxies, (6) targeted population for finding evidence. This study indicates that (i)
there is a need of a common and well-structured definition of financial literacy due to the interchangeably
usage of various concepts, all of which mean the financial knowledge level of individual, (ii) objective
measures seem to work best in measuring financial literacy among individuals, (iii) researchers should
reconsider about proxies for financial literacy in the event that individual effect of proxy may be difficult
to be seperated, (iv) it is better to consider that financial literacy may be potentially endogenous variable
rather than the exogenous one, (v) studies should present an explicit explanation how the relationship
between financial literacy and research problem (e.g., investment preferences) occurred, (vi) relative impact
of financial literacy should be preemptively examined by incorporating other potential factors influencing
financial decision making into research models.
Keywords: Financial literacy, financial behavior, subjective-objective financial literacy measures
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