http://papers.ssrn.com/sol3/papers.cfm?abstract_id=973790
The Age of Reason: Financial Decisions Over the Lifecycle
SUMIT AGARWAL Federal Reserve Bank of Chicago - Economic ResearchJOHN C. DRISCOLL Federal Reserve Board - Division of Monetary AffairsXAVIER GABAIX New York University Stern School of Business; National Bureau of Economic Research (NBER)DAVID LAIBSON Harvard University - Department of Economics; National Bureau of Economic Research (NBER)
June 7, 2007MIT Department of Economics Working Paper No. 07-11
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.
1 comment:
I imagine middle-aged people make more transactions too. Sophistication is a good word for the savvy-ness that one acquires. Wouldn't we expect people to become better at shopping as they do more of it? They have more incentive to inform themselves if they are making more transactions and they'll accumulate a more complete and better informed set of reference prices
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