Do older investors make better investment decisions?

Research output: Contribution to journalArticle

127 Citations (Scopus)

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 2011

Fingerprint

investor
ethnic group
low income
Investors
Investment decision
minority
experience

ASJC Scopus subject areas

  • Economics and Econometrics
  • Social Sciences (miscellaneous)

Cite this

Do older investors make better investment decisions? / Korniotis, George; Kumar, Alok.

In: Review of Economics and Statistics, Vol. 93, No. 1, 02.2011, p. 244-265.

Research output: Contribution to journalArticle

@article{b77e2a998e68442b85c793a2b3699359,
title = "Do older investors make better investment decisions?",
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.",
author = "George Korniotis and Alok Kumar",
year = "2011",
month = "2",
doi = "10.1162/REST_a_00053",
language = "English (US)",
volume = "93",
pages = "244--265",
journal = "Review of Economics and Statistics",
issn = "0034-6535",
publisher = "MIT Press Journals",
number = "1",

}

TY - JOUR

T1 - Do older investors make better investment decisions?

AU - Korniotis, George

AU - Kumar, Alok

PY - 2011/2

Y1 - 2011/2

N2 - 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.

AB - 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.

UR - http://www.scopus.com/inward/record.url?scp=79957501469&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=79957501469&partnerID=8YFLogxK

U2 - 10.1162/REST_a_00053

DO - 10.1162/REST_a_00053

M3 - Article

VL - 93

SP - 244

EP - 265

JO - Review of Economics and Statistics

JF - Review of Economics and Statistics

SN - 0034-6535

IS - 1

ER -