Financial knowledge acquisition and trading behavior: empirical evidence from an online information tool

Using the advent of the MiFID regulation in Europe, we conduct a robust quasi-natural experiment in a large sample of retail investors to analyze how some of them changed their trading behavior after being granted access to an online information tool. Focusing on investors who asked for the information tool, we find that subjective financial literacy and education are both positively related to financial knowledge acquisition, as suggested in Lusardi et al. (2017)′s model. Using propensity score matched difference-in-differences regressions, we show that financial knowledge acquisition has mixed effects on trading behavior: better portfolio diversification but higher trading intensity and lower net returns. Our empirical evidence indicates financial knowledge acquisition being complementary to financial literacy (instead of a substitute). It also reveals that the investment profile does matter to explain heterogeneity in behavior across investors.