Socioeconomic Status and Learning from Financial Information

61 Pages Posted: 20 May 2015 Last revised: 17 Jun 2016

See all articles by Camelia M. Kuhnen

Camelia M. Kuhnen

University of North Carolina Kenan-Flagler Business School & NBER

Andrei Miu

Babes-Bolyai University, Department of Psychology

Multiple version iconThere are 2 versions of this paper

Date Written: June 17, 2016

Abstract

The majority of lower socioeconomic status (SES) households in the U.S. and Europe do not have stock investments, which is detrimental to wealth accumulation. Here, we examine one explanation for this puzzling fact, namely, that economic adversity may influence how people learn from financial information. Using experimental and survey data from the U.S. and Romania, we find that lower SES individuals form more pessimistic beliefs about the distribution of stock returns and are less likely to invest in stocks when these investments are likely to have good outcomes. SES related differences in pessimism may help explain variation in investments across households.

Keywords: socioeconomic status, learning, beliefs, household finance, stock market participation

JEL Classification: D03, D14, D83, D84, G02, G11

Suggested Citation

Kuhnen, Camelia M. and Miu, Andrei, Socioeconomic Status and Learning from Financial Information (June 17, 2016). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2608192 or http://dx.doi.org/10.2139/ssrn.2608192

Camelia M. Kuhnen (Contact Author)

University of North Carolina Kenan-Flagler Business School & NBER ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
(919) 9623284 (Phone)

HOME PAGE: http://public.kenan-flagler.unc.edu/faculty/kuhnenc/

Andrei Miu

Babes-Bolyai University, Department of Psychology ( email )

37 Republicii
Cluj-Napoca, Cluj 400015
Romania

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