Optimism and Economic Choice

29 Pages Posted: 3 Sep 2007

See all articles by Manju Puri

Manju Puri

Duke University - Fuqua School of Business; NBER; FDIC

David T. Robinson

Fuqua School of Business, Duke University; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Abstract

We create a novel measure of optimism using the Survey of Consumer Finance by comparing self-reported life expectancy to that implied by statistical tables. This measure of optimism correlates with positive beliefs about future economic conditions and with psychometric tests of optimism. Optimism is related to numerous work/life choices: more optimistic people work harder, expect to retire later, are more likely to remarry, invest more in individual stocks, and save more. Interestingly, however, moderate optimists display reasonable financial behavior, whereas extreme optimists display financial habits and behavior that are generally not considered prudent

Keywords: Dispositional optimism, Psychology and economics, Household finance, Savings behavior, Self control

JEL Classification: G11, D12, D14

Suggested Citation

Puri, Manju and Robinson, David T., Optimism and Economic Choice. Journal of Financial Economics (JFE), 2007. Available at SSRN: https://ssrn.com/abstract=1010023

Manju Puri (Contact Author)

Duke University - Fuqua School of Business ( email )

100 Fuqua Drive
Box 90120
Durham, NC 27708-0120
United States
919-660-7657 (Phone)

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

FDIC ( email )

550 17th Street NW
Washington, DC 20429
United States

David T. Robinson

Fuqua School of Business, Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0120
United States
919-660-8023 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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