What is the reason why the portfolio of the elderly might differ from that of other investors?

One reason why the portfolio of the elderly might differ from that of other investors is thatthe elderly face mortality risk, and have, of course, shorter horizons than the non-elderly.

What is the effect of the perception of having limited abilities on the decision to invest in stocks?

Korniotis and Kumar (2006) point out that the perception of having limited abilities might also increase the cost of stock market participation.

How many implicate datasets are used to calculate the probability of leaving an inheritance?

SHARE data are imputed using a multiple imputation methodology – see Christelis (2008) for details - with five implicate datasets16generated from the original dataset that contain the imputed values.

What are the three main domains of ability that are relevant to financial planning?

SHARE provides results on all these domains, and in this paper the authors focus on the ones that seem more relevant for financial planning: ability to perform numerical operations (which the authors term numeracy), planning and executive function (fluency), and memory.

Open AccessJournal Article10.2139/SSRN.1275284

Cognitive Abilities and Portfolio Choice

Dimitris Christelis, +2 more

- 27 Sep 2008

- Social Science Research Network

806

TL;DR: In this paper, 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.

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

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1. What are the contributions in this paper?

The authors 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.

2. How many components of real wealth are imputed?

For wealth, there are 28.8 percent of households in which at least one component of real wealth values is imputed (55.7 percent in case of financial wealth).

3. What is the main argument that Sims (2003) makes?

Sims (2003) argues that cognitive skills act as an additional constraint that optimizing individuals face when6representative sample of the population aged 50+ in 11 European countries.

4. What is the effect of education on the probability of stockholding?

The effect of education is strong: it might reflect the fact that individuals with higher education are more financially sophisticated and thus face lower costs of stockholding, or differences in permanent income and resources.

Table 5. Robustness Checks for Direct Participation

Table 4. The effect of cognitive abilities on stockholding, by participation in social activities

Table 7. The effect of cognitive abilities on bondholding

Table 2. The effect of cognitive abilities on stockholding

Figure 1 Sample distributions of the indicators of cognitive abilities

Citations

Journal Article•10.1007/S41025-015-0022-2

Ökonomische Bildung als Treiber privater Vorsorge

Bastian Kramer, +1 more

- 01 Jan 2016

TL;DR: In this paper, angeschlossenem Financial Literacy-Test offenbart sowohl Selektions- als auch Indoktrinations- bzw. Lerneffekte okonomischer Bildung.

...read moreread less

•Journal Article•10.3389/FNHUM.2015.00280

Aging and loss decision making: increased risk aversion and decreased use of maximizing information, with correlated rationality and value maximization.

Yoanna A. Kurnianingsih, +3 more

- 13 May 2015

- Frontiers in Human Neuroscience

TL;DR: The results demonstrate that aging alters economic decision-making for losses through changes in both individual preferences and the strategies individuals employ, and suggest that OA are exhibiting a relationship between enhanced rationality and enhanced value maximization.

...read moreread less

Journal Article•10.2139/SSRN.2724533

The Level of Financial Literacy in Pakistan

Shama Ghaffar, +1 more

- 29 Jan 2016

- Social Science Research Network

TL;DR: In this paper, the authors examined the level of financial literacy in Pakistan and found that persons who have more financial knowledge, usually save money, while those with higher qualification and bigger family size advise their peers about managing the finances.

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•Journal Article•10.2139/SSRN.2014170

Financial literacy, Riester pensions, and other private old age provision in Germany

Tabea Bucher-Koenen

- 02 Dec 2011

- Social Science Research Network

TL;DR: This paper found that financial literacy is positively related to privately saving for retirement independent of state subsidies, and that private coverage is particularly low among individuals in the lowest income quartile, who would profit most from the state subsidies at the same time they show the lowest levels of financial literacy.

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The Influence of Mental Health on Portfolio Choice of Older Households

Cheuk Hee Cheung

- 01 Jan 2016

TL;DR: In this article, the influence of mental health on portfolio choice of elderly households was investigated using fixed effects regressions, and it was shown that memory problems and depression have negative indirect influence on ownership of risky assets in the portfolio of elderly individuals.

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...

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References

•Journal Article•10.2307/1914185

Prospect theory: analysis of decision under risk

Daniel Kahneman, +1 more

- 01 Jan 1979

- Econometrica

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•Book Chapter•10.1017/CBO9780511609220.014

Prospect theory: an analysis of decision under risk

Daniel Kahneman, +1 more

- 01 Mar 1979

- Econometrica

TL;DR: In this paper, the authors present a critique of expected utility theory as a descriptive model of decision making under risk, and develop an alternative model, called prospect theory, in which value is assigned to gains and losses rather than to final assets and in which probabilities are replaced by decision weights.

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Multiple imputation for nonresponse in surveys

Donald B. Rubin

- 01 Jan 1987

TL;DR: In this article, a survey of drinking behavior among men of retirement age was conducted and the results showed that the majority of the participants reported that they did not receive any benefits from the Social Security Administration.

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Multiple Imputation for Nonresponse in Surveys.

C. D. Kershaw, +1 more

- 01 Mar 1989

- Biometrics

TL;DR: This work focuses on the development of Imputation Models for Social Security Benefit Reconciliation in the context of a Finite Population and examines the role of Bayesian and Randomization--Based Inferences in these models.

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•Journal Article•10.1162/003355397555253

Golden Eggs and Hyperbolic Discounting

David Laibson

- 01 May 1997

- Quarterly Journal of Economics

TL;DR: The authors analyzes the decisions of a hyperbolic consumer who has access to an imperfect commitment technology: an illiquid asset whose sale must be initiated one period before the sale proceeds are received.

...read moreread less

6.6K

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Cognitive Abilities and Portfolio Choice

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Most frequently asked questions

1. What are the contributions in this paper?

2. How many components of real wealth are imputed?

3. What is the main argument that Sims (2003) makes?

4. What is the effect of education on the probability of stockholding?

5. What is the reason why the portfolio of the elderly might differ from that of other investors?

6. What is the effect of the perception of having limited abilities on the decision to invest in stocks?

7. How many implicate datasets are used to calculate the probability of leaving an inheritance?

8. What are the three main domains of ability that are relevant to financial planning?

Figures

Citations

Ökonomische Bildung als Treiber privater Vorsorge

Aging and loss decision making: increased risk aversion and decreased use of maximizing information, with correlated rationality and value maximization.

The Level of Financial Literacy in Pakistan

Financial literacy, Riester pensions, and other private old age provision in Germany

The Influence of Mental Health on Portfolio Choice of Older Households

References

Prospect theory: analysis of decision under risk

Prospect theory: an analysis of decision under risk

Multiple imputation for nonresponse in surveys

Multiple Imputation for Nonresponse in Surveys.

Golden Eggs and Hyperbolic Discounting

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