Cognitive abilities and behavioral biases

Jörg Oechssler ; Andreas Roider ; Patrick W. Schmitz

We use a simple, three-item test for cognitive abilities to investigate whether established behavioral biases that play a prominent role in behavioral economics and finance are related to cognitive abilities. We find that higher test scores on the Cognitive Reflection Test of Frederick (2005) indeed are correlated with lower incidences of the conjunction fallacy, conservatism in updating probabil-ities, and overconfidence. Test scores are also significantly related to subjects' time and risk preferences. We find no influence on anchoring. However, even if biases are lower for people with higher cognitive abilities, they still remain substantial.

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Year of publication:	May 19, 2008
Other Persons:	Oechssler, Joerg (contributor) ; Roider, Andreas (contributor) ; Schmitz, Patrick W. (contributor)
Publisher:	Mannheim : Univ. Mannheim, Sonderforschungsbereich 504 Heidelberg : Universitätsbibliothek der Universität Heidelberg Heidelberg : University of Heidelberg, Department of Economics
Subject:	behavioral finance \| biases \| cognitive abilities \| cognitive refl ection test \| Cognitive Reflection Test \| Anlageverhalten \| Behavioural finance \| Verhaltensökonomik \| Behavioral economics \| Kognition \| Cognition \| Entscheidung \| Decision \| Experiment \| Befangenheit \| Kognitive Kompetenz \| Investitionsentscheidung

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Extent:	1 Online-Ressource
Series:	Discussion paper series / University of Heidelberg, Department of Economics. - Heidelberg : [Verlag nicht ermittelbar], ZDB-ID 2217357-2. - Vol. no. 465 Discussion paper series / University of Heidelberg, Department of Economics. - Heidelberg : [Verlag nicht ermittelbar], ZDB-ID 2217357-2. - Vol. 465
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature
Language:	English
Notes:	Systemvoraussetzungen: Acrobat Reader
Other identifiers:	hdl:10419/127285 [Handle]
Classification:	C91 - Laboratory, Individual Behavior ; D80 - Information and Uncertainty. General ; D90 - Intertemporal Choice and Growth. General ; J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10003747336