Do older investors make better investment decisions?

Research output: Contribution to journalArticle

141 Scopus citations

Abstract

This paper examines the investment decisions of older individual investors. We find that older and experienced investors are more likely to follow rules of thumb that reflect greater investment knowledge. However, older investors are less effective in applying their investment knowledge and exhibit worse investment skill, especially if they are less educated, earn lower income, and belong to minority racial/ethnic groups. Overall, the adverse effects of aging dominate the positive effects of experience. These results indicate that older investors' portfolio decisions reflect greater knowledge about investing, but investment skill deteriorates with age due to the adverse effects of cognitive aging.

Original languageEnglish (US)
Pages (from-to)244-265
Number of pages22
JournalReview of Economics and Statistics
Volume93
Issue number1
DOIs
StatePublished - Feb 1 2011

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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