André Gyllenram (), Niklas Hanes () and Jörgen Hellström ()
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André Gyllenram: Department of Economics, Umeå School of Business and Economics, Postal: Umeå University, S 901 87 Umeå, Sweden
Niklas Hanes: Department of Economics, Umeå School of Business and Economics, Postal: Umeå University, S 901 87 Umeå, Sweden
Jörgen Hellström: Umeå School of Business and Economics, Postal: Umeå University, S 901 87 Umeå, Sweden
Abstract: Stock market participation is found to be positively related to cognitive, as well as non-cognitive ability, controlling for wealth, income, age, and other demographic and socioeconomic factors. Interestingly, the effects are of economic significant magnitudes, e.g. participation is on average 11.49% larger among those with high compared with low cognitive and non-cognitive abilities, and holds also when controlling for individuals risk preferences. The later indicates that cognitive and non-cognitive abilities have a role in affecting financial decisions also through non-preference driven effects. Limitations in non-cognitive ability do further explain non-participation among affluent individuals.
Keywords: Household finance; Investor behavior; Stock market participation; Psychological traits; Intelligence; Risk preferences
43 pages, September 30, 2013
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