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Who lost the most? Financial literacy, cognitive abilities, and the financial crisis

Tabea Bucher-Koenen and Michael Ziegelmeyer

No 1299, Working Paper Series from European Central Bank

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. JEL Classification: D91, D14, G11

Keywords: cognitive ability; financial crisis; financial literacy; life-cycle savings; portfolio choice; saving behavior (search for similar items in EconPapers)
Date: 2011-02
New Economics Papers: this item is included in nep-cbe and nep-neu
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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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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