On financial quotient: Theory and empirical analysis

• Main Author: SUN, Gang
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2021
• Subjects: Financial Quotient; Financial Quotient Index; Financial Quotient Education; Financial Quotient Evaluation; Finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/etd_coll/363; https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1361&context=etd_coll
• Institution: Singapore Management University

Financial Quotient (FQ) has become a common topic of concern in the global academic, business and social communities, but at this stage, academic research on FQ and its education are still immature, theoretical depth and empirical support basis are shortage, and influence factors of FQ and the degree of influence of each factor have not been systematically studied. Therefore, there is a large gap between research and practice. The purpose of this Paper is to construct a set of scientific and reasonable FQ index for individuals, to find factors that can influence or predict personal financial quotient (PFQ), and to design a formula for calculating FQ index, to construct a set of FQ measures and to apply them systematically and universally to the assessment of PFQ. Based on a study of the established literature, as well as research within the financial industry, this Paper finds that Return on Investment (ROI), ability to control risk, sense of security and happiness construct as a proxy indicator of FQ. Meanwhile, based on interviews and research in the industry and referring to researches in the existing literature, the authors of this Paper selected five factors with strong correlations from dozens of influencing factors of FQ as explanatory variables of FQ in an attempt to uncover the relationship between influencing factors and FQ. The five influencing factors of FQ include: Risk Appetite/Behavior Bias, Social Networking/Information Channel, Consumption Habits/Consumption Concepts, Growth Environment and Financial Literacy. This Paper will elaborate on the theoretical underpinnings of FQ and its impact factors. Based on the China Household Finance Survey Database of the Survey and Research Center for China Household Finance (CHFS), this Paper selects 74 questions from 2,859 questionnaire questions to construct explanatory variables, and selects 18 questions to construct explained variables for empirical tests, then explores the correlation between each impact factor and FQ This Paper comprehensively sorts out existing research and expounds the theoretical basis of FQ. The empirical part uses the questionnaires and data from CHFS to construct scoring tables for all explanatory variables and explained variables, drawing the following conclusions: There is a significant negative correlation between Risk Appetite/Behavior Bias and FQ index; a significant positive correlation between Social Networking/Information Channel and FQ index; no significant correlation between Consumption Habits/Consumption Concepts and FQ; a significant positive correlation between Growth Environment and FQ index; a significant positive correlation between Financial Literacy and FQ index. This paper designs the PFQ index, which will be applied to the FQ education and evaluation in the future. The author will also deepen the research on FQ from multiple dimensions at multiple levels. Scholars, businessmen and educators are welcome to be involved in the research and educational promotion of FQ.