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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: D91 D14 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-neu
Date: 2011-02
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Forthcoming as: "Once burned, twice shy? Financial literacy and wealth losses during the financial crisis?, Review of Finance, forthcoming

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http://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) Downloads
Working Paper: Who lost the most? Financial Literacy, Cognitive Abilities, and the Financial Crisis (2011) Downloads
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