Do Older Investors Make Better Investment Decisions?
George M. Korniotis
University of Miami
University of Miami - School of Business Administration
July 1, 2009
Review of Economics and Statistics, Forthcoming
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
Date posted: March 20, 2006 ; Last revised: July 11, 2009