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Socioeconomic status and learning from financial information

Camelia Kuhnen () and Andrei C. Miu

Journal of Financial Economics, 2017, vol. 124, issue 2, 349-372

Abstract: The majority of lower socioeconomic status (SES) households in the U.S. and Europe do not have stock investments, which is detrimental to wealth accumulation. Here, we examine one explanation for this puzzling fact, namely, that economic adversity may influence how people learn from financial information. Using experimental and survey data from the U.S. and Romania, we find that lower SES individuals form more pessimistic beliefs about the distribution of stock returns and are less likely to invest in stocks when these investments are likely to have good outcomes. SES-related differences in pessimism may help explain variation in investments across households.

Keywords: Socioeconomic status; Learning; Beliefs; Household finance; Stock market participation (search for similar items in EconPapers)
JEL-codes: D03 D14 D83 D84 G02 G11 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Socioeconomic Status and Learning from Financial Information (2015) Downloads
Working Paper: Socioeconomic Status and Learning from Financial Information (2015) Downloads
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Handle: RePEc:eee:jfinec:v:124:y:2017:i:2:p:349-372