The Influence of Financial Knowledge on Household Investment Return Rate : ——Based on the Big Data Research of Sharpe ratio

Abstract

With the Chinese economy's gradual development over the past decades, people's income has increased, and people are paying more attention to financial asset investment. The ratio of return on investment in household financial assets may be significantly affected by financial knowledge level. Based on the big data from the Chinese Household Finance Survey (CHFS) questionnaire, this paper empirically tests the impact of financial knowledge on household investment returns. As an innovation, we use the Sharpe ratio that is calculated from the big data as a quantitative description of the household investment return rate, which is relatively novel. Based on the control of risk tolerance and other demographic-related characteristics, we find that financial knowledge has a significant role in promoting household investment returns.