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Do Older Investors Make Better Investment Decisions?George M. KorniotisUniversity of Miami Alok KumarUniversity of Miami - School of Business Administration July 1, 2009 Review of Economics and Statistics, Forthcoming Abstract: This paper examines the investment decisions of older individual investors. We find that older and experienced investors are more likely to follow "rules of thumb" that reflect greater investment knowledge. However, older investors are less effective in applying their investment knowledge and exhibit worse investment skill, especially if they are less educated, earn lower income, and belong to minority racial/ethnic groups. Overall, the adverse effects of aging dominate the positive effects of experience. These results indicate that older investors' portfolio decisions reflect greater knowledge about investing but investment skill deteriorates with age due to the adverse effects of cognitive aging.
Number of Pages in PDF File: 65 Keywords: Older individual investors, cognitive aging, investment experience, learning, rules of thumb, investment skill JEL Classification: D14, G11, J14 Accepted Paper SeriesDate posted: March 20, 2006 ; Last revised: July 11, 2009Suggested CitationContact Information
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