Cognitive Abilities and Household Financial Decision Making
AbstractWe analyze the effects of cognitive abilities on two examples of consumer financial decisions where suboptimal behavior is well defined. The first example features the optimal use of credit cards for convenience transactions after a balance transfer and the second involves a financial mistake on a home equity loan application. We find that consumers with higher overall test scores, and specifically those with higher math scores, are substantially less likely to make a financial mistake. These mistakes are generally not associated with nonmath test scores. (JEL D14, G21)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Journal: Applied Economics.
Volume (Year): 5 (2013)
Issue (Month): 1 (January)
Other versions of this item:
- Sumit Agarwal & Bhash Mazumder, 2011. "Cognitive abilities and household financial decision making," Working Paper Series WP-2010-16, Federal Reserve Bank of Chicago.
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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