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Cognitive Abilities and Portfolio Choice

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  • Jappelli, Tullio
  • Padula, Mario

Abstract

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.

Suggested Citation

  • Jappelli, Tullio & Padula, Mario, 2006. "Cognitive Abilities and Portfolio Choice," CEPR Discussion Papers 5735, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5735
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    More about this item

    Keywords

    Cognitive abilities; Stockholding; Portfolio choice;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • G1 - Financial Economics - - General Financial Markets

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