EconPapers    
Economics at your fingertips  
 

IQ, Expectations, and Choice

Francesco D'Acunto, Daniel Hoang, Maritta Paloviita () and Michael Weber ()

No 2/2019, Research Discussion Papers from Bank of Finland

Abstract: We use administrative and survey-based micro data to study the relationship between cognitive abilities (IQ), the formation of economic expectations, and the choices of a representative male population. Men above the median IQ (high-IQ men) display 50% lower forecast errors for inflation than other men. The inflation expectations and perceptions of high-IQ men, but not others, are positively correlated over time. High-IQ men are also less likely to round and to forecast implausible values. In terms of choice, only high-IQ men increase their propensity to consume when expecting higher inflation as the consumer Euler equation prescribes. High-IQ men are also forward-looking - they are more likely to save for retirement conditional on saving. Education levels, income, socio-economic status, and employment status, although important, do not explain the variation in expectations and choice by IQ. Our results have implications for heterogeneous-beliefs models of household consumption, saving, and investment.

JEL-codes: D12 D84 D91 E21 E31 E32 E52 E65 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2019-01-18
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://helda.helsinki.fi/bof/bitstream/123456789/16027/3/BoF_DP_1902.pdf (application/pdf)

Related works:
Working Paper: IQ, Expectations, and Choice (2019) Downloads
Working Paper: IQ, expectations, and choice (2019) Downloads
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:bof:bofrdp:2019_002

Access Statistics for this paper

More papers in Research Discussion Papers from Bank of Finland Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland. Contact information at EDIRC.
Bibliographic data for series maintained by Minna Nyman ().

 
Page updated 2019-10-14
Handle: RePEc:bof:bofrdp:2019_002