2022/06/21 by Chien-An Lin, Timothy C. Bates · 1 voice · 1 citation
Business, Management and Accounting · Economics, Econometrics and Finance · #Economic theories and models #Financial Literacy, Pension, Retirement Analysis #Financial Markets and Investment Strategies
paper · pdf · doi:10.1016/j.intell.2022.101667
openalex publication_date 2022/06/21 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01
Cognitive ability correlates positively with many financial outcomes but why? One important relationship to understand is the degree to which cognitive ability is associated with greater knowledge of economics, but this has not been tested extensively. Here in two large, pre-registered studies (N = 1356), we tested the relationship between cognitive ability and both economic knowledge and financial literacy. Three predictions were key: i) Cognitive ability would show a large positive association with economic knowledge; ii) Cognitive ability would be associated with better financial literacy and iii) Greater economic knowledge would be positively associated with financial literacy. All three predictions were supported and replicated. Cognitive ability predicted economic knowledge (r = 0.37 to 0.52) independent of and with much larger effects than either educational attainment or economics courses. The findings extend effects of general ability to include greater awareness of economic functions, and improved use of economic information which improves lifetime financial wellbeing.