LAUSR

This study investigated whether overconfidence with respect to one’s financial literacy affects stock market participation and retirement preparation and if so, how. Using an effective sample of 12,653 Japanese individuals, the empirical results confirm that financial literacy plays a positive role, while confidence in financial literacy also matters. For people with relatively low financial literacy, overconfidence can encourage taking financial action, while for people with high financial literacy, underconfidence can deter action. Confidence could have an effect equal to or greater than financial literacy. Moreover, it was also found that the positive effect of overconfidence is weaker for women than for men.