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This paper aims at analyzing a case study article by Clark et al., which is entitled “Financial Knowledge and 401(k) Investment Performance: A Case Study.” The article was published in the Journal of Pension Economics and Finance in 2017. The research question was whether financial literacy influenced the investment results of investors using retirement plans. The rationale for conducting this research was that previous studies did not focus specifically on the association between financial knowledge and investment outcomes. Those studies either did not assess how savvy their respondents were or used participants’ self-reported portfolios, not supported by any administrative records (Clark et al. 326). To address the gaps in the previous research, Clark et al. retrieved administrative records on employees’ investment performance from the OEB Fed (327). They also conducted an online survey to assess the financial knowledge of these employees (Clark et al. 327). After that, they synthesized the results of the survey with workers’ investment performance to answer their research question.

Upon collecting the research data, the authors carried out a multivariate analysis of respondents’ financial knowledge and investment portfolios. Based on the results of the survey, participants were divided into three groups, ranging from the least to the most financially savvy. As for participants’ portfolios, researchers analyzed four investment outcomes, including “the portfolio equity share, expected excess return, SD, and non-systematic risk share” (Clark et al. 335). Clark et al. also controlled on respondents’ characteristics, such as sex, age, marital status, plan balance, and income (337). The results of the research were presented in tables in the form of linear regression estimates and coefficient estimates.

In the case study under consideration, the theory was the first, followed by empirical findings. Researchers were aware of the existence of the association between financial knowledge and investment outcomes from the existing studies. Therefore, they aimed at confirming their hypothesis that more financially savvy investors earned more on their retirement plans than their financially illiterate counterparts. The conclusions of the study were that financial literacy positively influenced investment outcomes, mainly because the most financially savvy investors chose better portfolios with lower non-systematic risks (Clark et al. 344). These theoretical conclusions are well-grounded in the empirical results of the study, showing that the percentage of stock owned by the most knowledgeable investors was 18 points more than that of their least knowledgeable counterparts (Clark et al. 344). Furthermore, financially savvy employees were likely to earn higher monthly excess returns, and their portfolios had 40% higher volatility and 38% less idiosyncratic risk (Clark et al. 344). The research findings indicated the need to improve the financial literacy of the US citizens to avoid retirement wealth inequality.

This study is different from other studies devoted to the link between wealth accumulation and financial literacy due to its reliance on administrative records rather than self-reported portfolios and purpose-designed survey assessing financial knowledge. Researchers used the case study method in a proper way since they identified the research question that was underexplored in the extant literature, collected and analyzed reliable data, and came to a generalized conclusion based on the case findings. The case study research design was appropriate for the research question at hand because it allowed researchers to prove their hypothesis. This study can be developed by adding an assessment of how interventions aimed at improving financial literacy would influence employees’ investment outcomes.

Work Cited

Clark, Robert, et al. “Financial Knowledge and 401(k) Investment Performance: A Case Study.” Journal of Pension Economics and Finance, vol. 16, no. 3, 2017, pp. 324-347.

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