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Seoul Journal of Economics - Vol. 35 , No. 4

[ Article ]
Seoul Journal of Economics - Vol. 35, No. 2, pp. 159-186
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 31 May 2022
Received 07 Dec 2021 Revised 19 Apr 2022 Accepted 12 May 2022

Heterogeneous Relationship between Financial Literacy and Fund Investment Behaviors: Evidence from South Korea during the Financial Crisis
Jongwoo Chung ; Booyuel Kim
Jongwoo Chung, Economist, Micro & Institutional Economics Team, Economic Research Institute, Bank of Korea (
Booyuel Kim, Associate Professor, Department of Environmental Planning, Graduate School of Environmental Studies, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul 08826, Republic of Korea (

JEL Classification: D12, D91, E22, G11


The importance of financial knowledge on efficient investment behaviors is well known. However, few studies have examined the relationship between financial literacy and investment behaviors under different economic situations. Using the 2007–2016 Fund Investors Survey from South Korea, 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 financial markets and negatively related to fund exit decisions during the financial crisis (2007–2008). However, in the post-crisis period (2009–2016), both subjective and objective financial knowledge affect fund investment behaviors. 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 overconfident investors whose subjective knowledge level deviates from objective knowledge but by the group whose subjective and objective knowledge are highly calibrated.

Keywords: Financial Crisis, Financial literacy, Knowledge calibration, Objective knowledge, Subjective knowledge


The authors would like to thank Korea Financial Investors Protection Foundation for providing the “Fund Investors Survey 2007–2016” dataset. We also appreciate Taejun (David) Lee and seminar participants at the 2020 KDI School–World Bank DIME Conference on Impact Evaluation, 2020 IAFICO (International Academy of Financial Consumers) Annual Conference, and BOKERI (Bank of Korea Economic Research Institute) Seminar for their helpful comments. No potential competing interest was reported by the authors.

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