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Financial literacy is often measured with only three to five questions, suggesting challenges with achieving respectable levels of internal consistency reliability. Based on our review, we found financial literacy tests composed of three and five test questions yielded mean reliability estimates of 0.40 (k = 7; N = 167,075) and 0.54 (k = 8; N = 57,937), respectively: values less than minimally acceptable for even exploratory research. Based on our more comprehensive review of 52 samples and a variety of financial literacy tests (3–45 questions), researchers are recommended to measure financial literacy with a minimum of 13–15 questions. Finally, we conclude that the potential impact of financial literacy on various outcome variables has been underestimated substantially in many previous investigations, as the relatively low levels of internal consistency reliability in the financial literacy test scores attenuated the obtained effects estimated from the observed scores. [ABSTRACT FROM AUTHOR]

Prior research consistently finds a gender gap in financial knowledge where males appear to outperform females. Despite the wealth of studies attempting to explain this gap, none have considered whether the gender gap may be a product of measurement method. This study re‐examines the gender gap with item response theory (IRT) which can account for guessing behavior and differential item functioning. Survey data on 184,869 individuals from 39 countries and territories is analyzed. Results show that when IRT is employed, a gender gap exists in only 54% of the sample. In contrast, when a conventional measurement approach is used, there is a gender gap in financial knowledge in 81% of the sample. These results reveal that prior measurements may underestimate women's financial knowledge and inflate the gender gap. [ABSTRACT FROM AUTHOR]

Superannuation funds heavily outsource key fund functions to service providers who play a crucial role in superannuation fund operations and affecting Australians' retirement savings. We examine the impact of related party service provider usage and trustee‐director affiliation on investment performance. We find that for‐profit funds significantly underperform when using related party service providers. The underperformance is more severe when the board is controlled by more affiliated trustee‐directors and belongs to a vertically integrated conglomerate group. Our results raise concerns about whether recent regulatory reforms increasing trustee‐directors' duties effectively address the conflicts of interest inherent in related party service provider arrangements. [ABSTRACT FROM AUTHOR]

We examine the investment skill of socially responsible investment (SRI) fund managers. Prior studies use the 'alpha' from standard asset pricing models as a proxy for management skill. However, implicit in the use of such models is that managers operate under no investment constraints. In the SRI context, this is patently false and can lead to biased alpha estimates and false conclusions about the existence of skill. We introduce a novel three-factor Fama-French asset-pricing model with the aim of estimating alpha more accurately and hence investment skill, without bias. This model excludes SRI-prohibited industries such as defense, alcohol, tobacco and gambling in the construction of the Fama-French market, value and size risk factors. We show that the exclusion of the SRI-prohibited industries leads to subtle and complex changes to the risk factors that drive SRI returns. When we re-estimate alpha using the new model we find, in contrast to the conventional Fama-French model, evidence of statistically and economically significant alpha. Furthermore, the risk loadings on the new risk factors are similar to those of the original Fama-French model suggesting that changes in risk loadings are not responsible for the finding of significant skill. [ABSTRACT FROM AUTHOR]