Zhengwei Wang

Bio: Zhengwei Wang is an academic researcher from Tsinghua University. The author has contributed to research in topics: Loan & Financial literacy. The author has an hindex of 7, co-authored 29 publications receiving 283 citations.

Financial Literacy, Portfolio Choice, and Financial Well-Being

Abstract: This study examined potential effects of financial literacy on household portfolio choice and investment return, an indicator of financial wellbeing. Using data from the 2014 Chinese Survey of Consumer Finance, financial literacy was measured and further categorized into basic financial literacy and advanced financial literacy. This study tested the hypothesis that financial literacy affects household choice between stock and mutual fund. The results indicated that households with higher financial literacy, especially those with higher level of advanced financial literacy tended to delegate at least part of their portfolio to experts and invest in mutual fund. However, households who were overconfident about their financial literacy tended to invest by themselves and were more likely to hold only stocks in their portfolios. The findings also indicated that households with higher financial literacy had a better chance of receiving a positive investment return, suggesting that higher financial literacy may result in a better financial outcome.

Financial Literacy Overconfidence and Stock Market Participation

Abstract: Stock market participation is considered as an indicator of consumer financial well-being. This study examined the association between financial literacy overconfidence and stock market participation. Financial literacy overconfidence was measured by the difference between an individual’s subjective and objective financial literacy scores. Data from the 2012 Chinese Survey of Consumer Finance was analyzed. The results showed that financial literacy overconfidence is positively correlated with stock market participation. On the other hand, under-confidence is negatively correlated to stock market participation. This study contributes to the existing literature by relating a unique factor, financial literacy overconfidence, to stock market participation.

Financial literacy and retail investors' financial welfare: Evidence from mutual fund investment outcomes in China

Abstract: This paper examines the financial literacy of mutual fund retail investors and its relationship with their investment outcomes. Using a unique dataset on Chinese mutual fund retail investors containing a survey on financial literacy, we find that women display significantly lower financial literacy than men. Investors with a higher level of education and richer investment experience have higher financial literacy. A one-standard-deviation increase in advanced financial literacy is associated with a probability decrease of an individual investor suffering a major loss by 1.940 percentage points, >13% of the sample average. Highly literate investors also show more sophistication concerning fee-related issues: they are more likely to be aware of investment charges, to avoid high-fee funds sold by intermediaries, and to trade less. Moreover, we find that advanced literacy has a significantly larger impact on investment performance than basic literacy. These results can be helpful to the policy debate on the effects of financial education.

China’s Anti-Corruption Campaign and Credit Reallocation from SOEs to Non-SOEs

Abstract: We find that the anti-corruption investigations in China lead to increases in debt issuances for privately-owned, non-SOE peer firms. Our findings suggest that the industry-specific competition effect dominates the contagion effect for non-SOE peers. In contrast, SOE peers experience reductions in debt issuances following anit-corruption investigations. This credit reallocation is associated with higher investment efficiency, suggesting that non-SOE rivals with high productivity benefit from SOE rivals’ potential loss of political connection. This credit shift towards non-SOE firms is more pronounced in short-term debt and bank loans, indicating a supply-side explanation that we corroborate using an exogenous shock in the banking sector.

Government Affiliation and Peer-to-Peer Lending Platforms in China

Abstract: With thousands of co-existing and competing platforms, the Chinese peer-to-peer (P2P) lending market experienced both high growth and high failure rate We hand collect unique data for these P2P platforms and investigate the differences in performances and survivals for platforms with and without affiliations with state-owned enterprises (SOEs) P2P platforms with SOE affiliations have higher trading volumes, attract more investors, and offer lower interest rates These platforms also survive significantly better than those without the SOE affiliations, especially during market downturns Using P2P platforms with fake SOE affiliations as identification, we show that the SOE affiliation itself (not related to the fundamentals) is an important signal for P2P market participants These results can be helpful to investors and regulators, especially those from other emerging markets

Thinking fast and slow.

Abstract: In 1974 an article appeared in Science magazine with the dry-sounding title “Judgment Under Uncertainty: Heuristics and Biases” by a pair of psychologists who were not well known outside their discipline of decision theory. In it Amos Tversky and Daniel Kahneman introduced the world to Prospect Theory, which mapped out how humans actually behave when faced with decisions about gains and losses, in contrast to how economists assumed that people behave. Prospect Theory turned Economics on its head by demonstrating through a series of ingenious experiments that people are much more concerned with losses than they are with gains, and that framing a choice from one perspective or the other will result in decisions that are exactly the opposite of each other, even if the outcomes are monetarily the same. Prospect Theory led cognitive psychology in a new direction that began to uncover other human biases in thinking that are probably not learned but are part of our brain’s wiring.

Taxation, Saving, and the Rate of Interest

Abstract: After exploring both the crucial role of the interest elasticity of the saving rate in the analysis of a wide variety of issues in economic - particularly tax - policy and reasons why previous studies of the effect of interest rates on consumption and saving have biased the estimated elasticity toward zero, this study presents new estimates of consumption functions based on aggregate U.S. time series data. The results are striking: a variety of functional forms, estimation methods and definitions of the real after-tax rate of return invariably lead to the conclusion of a substantial interest elasticity of saving.