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

Tabea Bucher-Koenen () and Michael Ziegelmeyer

No 54, BCL working papers from Central Bank of Luxembourg

Abstract: We study how and to what extent private households are affected by the recent financial crisis and how their financial decisions are inuenced 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 longterm consequences if individuals do not participate in markets' recovery and face lower returns in the long run.

Keywords: Financial literacy; cognitive ability; financial crisis; life-cycle savings; saving behavior; portfolio choice (search for similar items in EconPapers)
JEL-codes: D14 D91 G11 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2011-02
New Economics Papers: this item is included in nep-neu
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Forthcoming as: "Once burned, twice shy? Financial literacy and wealth losses during the financial crisis?, Review of Finance, forthcoming

Downloads: (external link)
https://www.bcl.lu/fr/Recherche/publications/cahiers_etudes/54/BCLWP054.pdf (application/pdf)

Related works:
Working Paper: Who lost the most? Financial literacy, cognitive abilities, and the financial crisis (2011)
Working Paper: Who lost the most? Financial Literacy, Cognitive Abilities, and the Financial Crisis (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bcl:bclwop:bclwp054

Access Statistics for this paper

More papers in BCL working papers from Central Bank of Luxembourg Contact information at EDIRC.
Bibliographic data for series maintained by ().