Faculty of Economics and Business Administration Publications Database

Pricing sin stocks: Ethical preference vs. risk aversion

Georgarakos, Dimitris
Deuflhard, Florian
Volume: 17
Number: 1
Pages: 131 - 164
Month: February
ISSN-Print: 1542-4766
Link External Source: Online Version
Year: 2019

Savings accounts are owned by most households, but little is known about the performance of households’ investments. We create a unique dataset by matching information on individual savings accounts from the DNB Household Survey with market data on account-specific interest rates and characteristics. We document heterogeneity in returns across households, which can be partly explained by financial sophistication. A one-standard deviation increase in financial literacy is associated with a 12% increase compared to the median interest rate. We isolate the usage of modern technology (online accounts) as one channel through which financial literacy has a positive association with returns.