Learning by Trading

Learning by Trading

By Saumitra Jha, Moses Shayo
May 22,2018Working Paper No. 3673

The ability of individuals to make sound financial decisions and obtain sound advice is increasingly being questioned. Shortfalls in financial knowledge and confidence are particularly acute among women. This paper explores one easily scalable avenue for improving financial literacy and potentially attenuating this gender gap: learning by online trading in stocks. We randomly assign stocks to individuals and encourage them to trade on our platform for a period of either four or seven weeks. We provide no educational content beyond explaining how the value of their assets are determined and providing links to financial websites. Four months after the intervention, we test participants’ financial literacy. We find significant improvements relative to the control group. Importantly, the treatment reduces the gender gap in self-assessed financial knowledge for given objective financial literacy. Treated individuals claim greater familiarity with the stock market, greater willingness to invest in stocks, particularly in foreign assets, and a lower propensity to consult others for financial advice. The effects are greater for those exposed to more volatile stocks and assets that performed better during the study.