What do we really know about “don't know”? Re-assessing the measurement of financial knowledge

Survey protocols measuring financial knowledge typically offer a don't know (DK) response option along with factual statements about personal finance. The potential problem of this practice is that a DK response could capture something other than financial knowledge and mislead empirical research on the association between financial knowledge and behavioral outcomes. In this study, we examined whether the current scales are contaminated by systemic personality effects and how reduced validity influences analytical modeling of the knowledge effect. Two studies with different national datasets were conducted in this investigation. Study 1 found that personality types and emotions are partially correlated with the propensity to give a DK response. Study 2 showed that controlling for DK response options alters the association between financial knowledge and behaviors in regression analyses. Our findings suggest that a DK response reduces construct validity of the financial knowledge score.