Cognitive Abilities and Portfolio Choice

University of Venice Economics Working Paper No. 19/WP/2008

47 Pages Posted: 30 Sep 2008

See all articles by Dimitris Christelis

Dimitris Christelis

Adam Smith Business School, University of Glasgow; Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II; Center for Financial Studies (CFS); Netspar

Tullio Jappelli

University of Naples Federico II - Department of Economics and Statistics; Center for Studies in Economics and Finance - CSEF; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Mario Padula

University "Ca' Foscari" of Venice; CSEF

Multiple version iconThere are 2 versions of this paper

Date Written: September 27, 2008

Abstract

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

Keywords: cognitive abilities, stockholding, portfolio choice

JEL Classification: E2, D8, G1

Suggested Citation

Christelis, Dimitrios and Jappelli, Tullio and Padula, Mario, Cognitive Abilities and Portfolio Choice (September 27, 2008). University of Venice Economics Working Paper No. 19/WP/2008. Available at SSRN: https://ssrn.com/abstract=1275284 or http://dx.doi.org/10.2139/ssrn.1275284

Dimitrios Christelis (Contact Author)

Adam Smith Business School, University of Glasgow ( email )

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Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II ( email )

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Tullio Jappelli

University of Naples Federico II - Department of Economics and Statistics ( email )

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Napoli, 80126
Italy

HOME PAGE: http://www.csef.it/people/jappelli.htm

Center for Studies in Economics and Finance - CSEF

University of Naples Federico II
Via Cinthia - Monte S. Angelo
Napoli, 80146
Italy

HOME PAGE: http://www.csef.it/people/jappelli.htm

Centre for Economic Policy Research (CEPR)

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United Kingdom

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European Corporate Governance Institute (ECGI)

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Mario Padula

University "Ca' Foscari" of Venice ( email )

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Italy
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+390412349176 (Fax)

CSEF

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