Cognitive Abilities and Household Financial Decision Making

Cognitive Abilities and Household Financial Decision Making

We analyze the impact of cognitive skills on two specific examples of consumer financial decisions where suboptimal behavior is well defined: first, the use of a credit card for a transaction after making a balance transfer on the account, and second, cases where individuals are penalized for inaccurate estimation of the value of one’s home on home equity loan or line of credit application. We ...

Cognitive Abilities and Financial Decisions

This chapter demonstrates that a person’s level of cognitive abilities is a key determinant of financial decisions. Households with high cognitive abilities tend to participate more in the stock market and accumulate more financial wealth than households with low cognitive abilities. Upon participation, portfolio performance improves with experience but it is negatively correlated with age due ...

Task Workload and Cognitive Abilities in Dynamic Decision Making

Researchers often treat workload as a task-dependent variable. To evaluate the effect of workload on individuals' performance, researchers commonly use several methods, such as varying the complexity or number of tasks that test participants are asked to handle or placing individuals under time constraints. Only rarely have researchers investigated workload as a variable dependent on individual...

Policy Applications of Behavioral Insights to Household Financial Decision-Making Behavioral Science and Policy Symposium Financial Decision-Making Working Group

Role Taking Under Financial Risk Decision Making

This paper explores people’s behavior when they are facing financial risks. Through the setting of an economics experiment, people’s willingness to bear financial risks and their tendency to impose risks on others are investigated. The experiment result shows that most people are risk-neutral or risk-averse when making decision under financial environment, and their tendency to impose risks on ...