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Who lost the most? Financial Literacy, Cognitive Abilities, and the Financial Crisis

Tabea Bucher-Koenen () and Michael Ziegelmeyer

No 11234, MEA discussion paper series from Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy

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-codes: D14 D91 G11 (search for similar items in EconPapers)
Date: 2011-01-10
New Economics Papers: this item is included in nep-neu
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Citations: View citations in EconPapers (29)

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