DP5735 Cognitive Abilities and Portfolio Choice

Author(s):	Dimitris Christelis, Tullio Jappelli, Mario Padula
Publication Date:	July 2006
Keyword(s):	cognitive abilities, portfolio choice, stockholding
JEL(s):	D8, E2, G1
Programme Areas:	International Macroeconomics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=5735

We study the relation between cognitive ability and the decision to invest in stocks using the recent Survey of Health, Ageing and Retirement in Europe (SHARE). The survey 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 investment accounts. We also find that stockholding increases with social interactions, intention to leave a bequest, and is negatively associated with health status.