Cognitive abilities and portfolio choice

2009/05/14 by Dimitris Christelis, Tullio Jappelli, Mario Padula · 30 citations
Business, Management and Accounting · Economics, Econometrics and Finance · Medicine · Psychology · Social Sciences · #Actuarial science #Bond #Business #Cognition #Cognitive psychology #Cognitive skill #Economic Policies and Impacts #Economics #Finance #Financial Literacy, Pension, Retirement Analysis #Financial economics #Fluency #Gerontology #Health and Retirement Study #Insurance, Mortality, Demography, Risk Management #Medicine #Neuropsychology #Portfolio #Psychology #Recall #Stock (firearms) #Stock market #Verbal fluency test

paper · open access · doi:10.1016/j.euroecorev.2009.04.001

published in European Economic Review 54(1), 18-38 (Elsevier BV)

openalex publication_date 2009/05/14 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

We study the relation between cognitive abilities and stockholding using the recent
\nSurvey of Health, Ageing and Retirement in Europe (SHARE), which has detailed data on
\nwealth and portfolio composition of individuals aged 50+ in 11 European countries and
\nthree indicators of cognitive abilities: mathematical, verbal fluency, and recall skills. We
\n find that the propensity to invest in stocks is strongly associated with cognitive abilities,
\n for both direct stock market participation and indirect participation through mutual
\n funds and retirement accounts. Since the decision to invest in less information-intensive
\nassets (such as bonds) is less strongly related to cognitive abilities, we conclude that the
\nassociation between cognitive abilities and stockholding is driven by information
\nconstraints, rather than by features of preferences or psychological traits.

Citations

• Why do so Few Hold Stocks?
• Prospect Theory: An Analysis of Decision under Risk

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