The age of reason: financial decisions over the lifecycle

Sumit Agarwal, John Driscoll, Xavier Gabaix and David Laibson

No WP-07-05, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: The sophistication of financial decisions varies with age: middle-aged adults borrow at lower interest rates and pay fewer fees compared to both younger and older adults. We document this pattern in ten financial markets. The measured effects cannot be explained by observed risk characteristics. The sophistication of financial choices peaks around age 53 in our cross-sectional data. Our results are consistent with the hypothesis that financial sophistication rises and then falls with age, although the patterns that we observe represent a mix of age effects and cohort effects.

Keywords: Financial institutions; Loans (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-age, nep-bec and nep-mac
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Related works:
Working Paper: The Age of Reason: Financial Decisions Over the Lifecycle (2008)
Working Paper: The Age of Reason: Financial Decisions Over the Lifecycle (2007)
Working Paper: The Age of Reason: Financial Decisions Over the Lifecycle (2007)
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