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Do older investors make better investment decisions?

journal contribution
posted on 2011-02-01, 00:00 authored by G M Korniotis, A Kumar
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. © 2011 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

History

Journal

Review of economics and statistics

Volume

93

Issue

1

Pagination

244 - 265

Publisher

Harvard University Press

Location

Cambridge, Mass.

ISSN

0034-6535

eISSN

1530-9142

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal; C Journal article

Copyright notice

2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology