Swarn Chatterjee

The impact of self-efficacy on wealth accumulation and portfolio choice

Self-efficacy is a psychological construct based on the evaluations of ones ability to accomplish certain behaviours or achieve certain outcomes (Bandura, 1977). Although self-efficacy has been linked to health, task accomplishment, greater socio-economic status and income (Seeman and Seeman, 1983; Stretcher et al., 1986; Gecas and Seff, 1990; Judge et al., 2002; Zagorsky, 2007), there has been no study that investigates whether self-efficacy is also a predictor of greater wealth creation over a specific period of time. Applying a theoretical framework based on self-efficacy, this article investigates household financial behaviours using the National Longitudinal Survey of Youth (NLSY79) data-set. For the purpose of this study, change in wealth across time and financial market participation is modelled as a function of socio-economic and demographic variables drawn from prior literature. Findings from this research reveal that self-efficacy is indeed a predictor of investment for financial assets and is also a predictor of wealth creation across time.

Financial literacy, risky mortgages, and delinquency in the US during the financial crisis

Purpose - The purpose of this paper is to evaluate whether low financial literacy is associated with the use of risky mortgages and delinquency. Design/methodology/approach - A probit analysis is used to analyze the results of a survey of US homeowners. Findings - It was found that borrowers with low financial literacy are more likely to have a risky mortgage and be delinquent in their mortgage payments. Originality/value - The results indicate that many risky loan borrowers may be unable to evaluate the risks inherent in the mortgage, which contributes to high delinquency rates. These results suggest the need for education and caution in the use of risky mortgages.

Financial Strain and Participation in the Supplemental Nutrition Assistance Program

ABSTRACT Participation in the Supplemental Nutrition Assistance Program (SNAP) has increased over the past decade. Although poverty and sudden financial shock faced by households via unanticipated adverse events, such as sudden loss of income, are among major contributors, the findings of our study suggest that having an adequate stock of savings and financial assets might reduce the probability of household SNAP participation. Using data from the Panel Study of Income Dynamics, we tested whether a household’s emergency savings, asset poverty, and debt burden could predict SNAP participation separately from the effects of income and program participation. Results demonstrate that a household’s lack of emergency savings and asset inadequacy increased the probability of its SNAP participation. Implications for financial practitioners and policy makers are discussed.

The Association Between Consumer Competency and Supplemental Nutrition Assistance Program Participation on Food Insecurity

Objective To examine whether Supplemental Nutrition Assistance Program (SNAP) participants exhibited lower food insecurity when they also demonstrated desirable behaviors in the areas of financial management, nutrition literacy, and conscientious food shopping. Design Using data from the US Department of Agricultures newly launched National Household Food Acquisition and Purchase Survey, this study examined whether consumer competency is a factor that affects food insecurity. Participants A total of 4,158 participants were included. Sampling weights were applied to represent the population better. Main Outcome Measure(s) Very low food insecurity was the dependent variable. Important independent variables were participants’ financial management skills, nutrition literacy, and conscientious shopping. Analysis Logit and 2‐staged least‐squares models were used for empirical analyses. The significance of models was tested at .05, .01, and .001. Results Consumer competency‐related factors such as financial management ability, not defaulting on bill payments within the previous 6 months, and using the nutrition panel frequently when shopping were negatively associated with food insecurity and very low food security after controlling for a number of other demographic, socioeconomic, and behavioral characteristics. Conclusions and Implications Policies that focus solely on consumer competency programs such as SNAP‐Education might marginally achieve program goals but the effect would be modest owing to the unique challenges that SNAP participants may face. Further investigations are needed to understand better why SNAP participants do not benefit successfully from competent consumer practices.

False Confidence, Stock Market Participation, and Wealth Accumulation of Households: An Examination

This paper investigates whether false confidence, as characterized by a high level of personal mastery and a low level of intelligence (IQ), results in frequent investor trading and subsequent investor wealth erosion across time. Using the National Longitudinal Survey (NLSY79), change in wealth and asset allocation across time is modeled as a function of various behavioral, socio-economic and demographic variables drawn from prior literature. Findings of this research reveal that false confidence is indeed a predictor of trading activity in individual investment assets, and it also has a negative impact on individual wealth creation across time.

Financial Education Research Opportunities

This chapter provides a review and an overview of the research opportunities within a campus-based financial education program. It specifically focuses on the need for financial literacy research within the college student population and research on the financial management practices and credit behavior of college students. In this chapter, we summarize the findings of previous studies in the areas of financial literacy and students’ financial practices and credit behavior, and we discuss the important outcomes. We also discuss the needs and deficiencies of extant research and the future research opportunities that are likely to be available for campus-based financial education-related groups. This chapter includes recommendations for college and university personnel, student leaders, and research scholars who are interested in developing or improving the research agenda of campus-based financial education programs.

In Search of Value: How Subdivision Names Influence House Prices and Marketing Duration

Abstract The identity of residential areas has a strong influence on consumers searching for new housing. Yet, most studies have not dealt adequately with the implications of neighborhood name and characteristics as a marketing tool. This paper investigates how subdivision names selected by residential developers in Baton Rouge, Louisiana, affected property values and time on the market. We used a 20-year data series on house transactions to estimate these effects in a simultaneous model of price and marketing duration. Results indicated that an appropriate naming strategy can provide cues for consumers, which can expedite their purchase decision making process. In addition, suitably named subdivisions can promise an experience to which a substantial number of consumers aspire, creating demand and increasing the market prices of houses in the subdivision.

Social Security: Who Wants Private Accounts?

Preference for partial privatization of social security is explored using a 2004 sample of 7,565 young baby boomers. Two-thirds of the sample would choose partial privatization. While a greater proportion of higher-income, wealthier, and more educated respondents preferred private accounts, multivariate analysis reveals that intelligence has a stronger effect than socio-economic variables. An average of 43% would be invested in equities, but a surprising 35% would be invested in government bonds. Men and those with higher intelligence are more likely to prefer equities, while women prefer corporate bonds and the less educated, blacks, and respondents with children preferred government bonds.