Indecisiveness on risk preference and time preference choices. Does financial literacy matter?
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Date
2019
Authors
Mudzingiri, Calvin
Mwamba, John W. Muteba
Keyser, Jacobus Nicolaas
Bara, Alex
Journal Title
Journal ISSN
Volume Title
Publisher
Cogent OA
Abstract
The aim of this study is to investigate the relationship between financial
literacy and decisiveness in making risk preference and time preference choices by
university students. The study collected data using a questionnaire, implemented
a multiple price list risk preference and time preference experiment, and administered a financial literacy test on 192 university students (female = 53%).
A maximum of 7 680 risk preference and 7 680 time preference choices were
elicited from the university students. An ordinary least squares regression model
shows that multiple switching or indecisiveness on risk preference and time preference choices increase as financial literacy decreases. University students with
low financial literacy are more likely to switch back-forth between binary lotteries.
Low financial literacy increases behavioural biases and short cuts in making preference choices. Being financial literate helps university students to be decisive in making risk and time preference choices.
Description
Keywords
Risk preferences, Time preferences, Financial literacy, Indecisiveness, Experiment, Multiple price list, Multiple switching, JEL Classification: D14; D8; I22; C91
Citation
Mudzingiri, C., Mwamba, J. W. M., Keyser, J. N., & Bara, A. (2019). Indecisiveness on risk preference and time preference choices. Does financial literacy matter? Cogent Psychology, 6, 1647817. doi: 10.1080/23311908.2019.1647817