Financial literacy and mutual fund retail investing : evidence from Korea during the 2008 financial crisis

We investigate the heterogeneous effects of financial literacy on individual investment decisions during and after the 2008 financial crisis. While differentiating objective and subjective financial knowledge, we find that only subjective knowledge is positively related to participation in mutual fund markets during the financial crisis (2007-2008). However, in the post-crisis period (2009-2016), both subjective and objective financial knowledge affect mutual fund investment. We further examine these results through a knowledge calibration mechanism. We present suggestive evidence that the effect of subjective knowledge during the financial crisis is not driven by the overconfident investors, but by the group whose subjective and objective knowledge are highly calibrated