This paper examines the impact of financial literacy on stock price informativeness in a sample of firms from 20 countries. Using four measures of stock price informativeness, we find a significant relationship between higher financial literacy and higher stock price informativeness. The individual investors’ contribution regarding the incorporation of specific information into stock prices includes private information also and not mere specific information in the general sense. Financial knowledge is the key element that helps individual investors to incorporate specific information into stock prices.
Hofstede, G., Hofstede, G., Minkov, M., 2010. Cultures and Organizations, Software of the Mind, third ed. McGraw-Hill, New York
Jin L., Myers S. (2006) R2 around theworld, Journal of Financial Economics, 79, 257–292
Kan S., Gong S. (2017) Does High Stock return synchronicity Indicate High or Low Price Informativeness? Evidence from a regulatory experiment, International Review of Finance, https://doi.org/10.1111/irfi.12157