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Who lost the most? Financial Literacy, Cognitive Abilities, and the Financial Crisis

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  • Bucher-Koenen, Tabea

    ()

  • Ziegelmeyer, Michael

    () (Munich Center for the Economics of Aging (MEA))

Abstract

We study how and to what extent private households are affected by the recent financial crisis and how their financial decisions are influenced by this shock. Our analysis reveals that individuals with low levels of financial literacy are less likely to have invested in the stock market and thus are less likely to report losses in wealth. Yet, individuals with low financial literacy are more likely to sell their assets which lost in value (realize losses). This reaction to short-term losses has potential long-term consequences if individuals do not participate in markets' recovery and face lower returns in the long run.

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Bibliographic Info

Paper provided by Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy in its series MEA discussion paper series with number 11234.

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Date of creation: 10 Jan 2011
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Handle: RePEc:mea:meawpa:11234

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Citations

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Cited by:
  1. Xu, Lisa & Zia, Bilal, 2012. "Financial literacy around the world : an overview of the evidence with practical suggestions for the way forward," Policy Research Working Paper Series 6107, The World Bank.
  2. Tabea Bucher-Koenen & Annamaria Lusardi, 2011. "Financial Literacy and Retirement Planning in Germany," NBER Working Papers 17110, National Bureau of Economic Research, Inc.
  3. Ziegelmeyer, Michael & Nick, Julius, 2012. "Backing out of private pension provision - Lessons from Germany," MEA discussion paper series 12262, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  4. Lührmann, Melanie & Serra-Garcia, Marta & Winter, Joachim, 2012. "The effects of financial literacy training: Evidence from a field experiment with German high-school children," Discussion Papers in Economics 14101, University of Munich, Department of Economics.

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