Households' financial resilience, risk perceptions, and financial literacy - evidence from a survey experiment

Bucher-Koenen, Tabea ; Fessler, Pirmin ; Silgoner, Maria

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URN: urn:nbn:de:bsz:180-madoc-665490
Document Type: Working paper
Year of publication: 2023
The title of a journal, publication series: ZEW Discussion Papers
Volume: 23-074
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
Business School > Finanzmärkte (Bucher-Koenen 2019-)
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D14 , D91 , G53,
Keywords (English): financial fragility , expectations , risk assessment , financial behavior , over-optimism
Abstract: We examine the financial resilience of Austrian households, relating it to their experience of financial shocks earlier in life and to their financial literacy. We find that previous negative (positive) financial shocks are negatively (positively) related to financial resilience. Financial literacy and households’ financial resilience are positively related. Based on a randomized survey experiment, we investigate the role of over-optimism when evaluating the potential impact of future events on households’ financial situation. Households are asked to assess specific risks for their own household (treatment) or for a household with similar characteristics (control). On average, households assign a lower probability to shocks that negatively affect personal finances if asked for their own household compared to a similar household. We do not find the reverse effect for positive shocks. We find a negative correlation between over-optimism and financial literacy, indicating that financial literacy is relevant to both, financial behavior and the ability to assess financial shocks.

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