Abstract
This paper studies the role of individuals’ confidence in own financial literacy in explaining the gender gap in investment in risky assets, while controlling for actual financial literacy and risk aversion. It is the first paper to assess the role of confidence independent of actual financial knowledge for a large set of countries and it is the first to explore the role of confidence by using counterfactual decomposition techniques. Results from our analysis confirm recent findings of modern behavioral finance: confidence is a strong determinant of risky financial behavior and accounts for a large part of the gender gap.
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