Topic: Measuring Financial Literacy of Retail Investors

Speaker: Feng Xu, Professor, Tianjin University

Time: October 25, 2024 ,14:30      

Venue: EMS 419

Abstract:

We have developed a new measure of retail investors’ financial literacy by utilizing textual analysis of social media data. The text-based financial literacy measurement effectively differentiates between investors with high and low financial literacy. Furthermore, we show evidence that stocks invested in by highly financially literate investors yield statistically and economically significant high future returns. We find that highly financially literate investors engage in arbitrage trades related to stock anomalies. They exhibit greater information advantages and valuation skills compared to those with low financial literacy, enabling them to correct the mispricing of stock anomalies based on fundamental information. Our findings shed light on the relationship between investor trading behavior and financial literacy at the firm level.

Guest Bio:

Feng Xu is a professor at Tianjin University, selected by the National Young Talent Program. His research interests include financial text analysis, artificial intelligence and finance. He has published more than 50 papers in the Journal of Management Science, Management World, Journal of Management Information Systems, Journal of Money, Credit and Banking and other domestic and international journals. He is the coordinating editor of Journal of Management Science (English Edition) and associate editor of Finance Research Letters. He serves as the deputy director of the Youth Working Committee of the Chinese Society of Systems Engineering and the deputy secretary general of the Financial Systems Engineering Committee of the Chinese Society of Systems Engineering.