Socioeconomic Status and Learning from Financial Information

Camelia Kuhnen and Andrei C. Miu

No 21214, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The majority of lower socioeconomic status (SES) households do not have any stock investments, which is detrimental to wealth accumulation. Here, we examine one potential driver of this puzzling fact, namely, that SES may influence the process by which people learn from information in financial markets. In an experimental setting we find that low SES participants, relative to medium or high SES ones, form more pessimistic beliefs about the distribution of stock investment outcomes and are less likely to invest in stocks. The pessimism bias in assessing risky assets induced by low SES is robust to several ways of measuring one’s socioeconomic standing and it replicates out of sample. These results suggest that SES shapes in predictable ways people’s beliefs about financial assets, which in turn may induce large differences across households in their propensity to participate in financial markets.

JEL-codes: D03 D14 D83 D84 G02 G11 (search for similar items in EconPapers)
Date: 2015-05
Note: AP
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Published as Kuhnen, Camelia M. & Miu, Andrei C., 2017. "Socioeconomic status and learning from financial information," Journal of Financial Economics, Elsevier, vol. 124(2), pages 349-372.

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Journal Article: Socioeconomic status and learning from financial information (2017)
Working Paper: Socioeconomic Status and Learning from Financial Information (2015)
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