Journal of Banking & Finance Vol. 163 2024
Financial literacy and mortgage stress
Abstract
This paper examines the effect of financial literacy on mortgage stress. Using data from the Panel Study of Income Dynamics (PSID), we find that borrowers with high levels of financial literacy are 60.3 percent less likely to suffer from mortgage stress than borrowers with low levels of financial literacy after controlling for observables. Our estimated results are robust to potential sample selection bias and functional mis-specification. In addition, we also find that the effect of financial literacy varies across borrowers of different ages. Further analysis reveals strong cross effects of financial literacy and quantitative reasoning on mortgage stress.
- DOI
- 10.1016/j.jbankfin.2024.107170
- Volume
- 163
- Pages
- 107170
- Language
- en
- Sources
- openalex crossref semanticscholar