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Cognitive abilities and behavioral biases

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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...

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Bibliographic Details
Other Authors: Oechssler, Joerg (Other) , Roider, Andreas (Other) , Schmitz, Patrick W. (Other)
Format: Book/Monograph Working Paper
Language:English
Published: Mannheim Univ. Mannheim, Sonderforschungsbereich 504 May 19, 2008
Heidelberg Universitätsbibliothek der Universität Heidelberg May 19, 2008
Heidelberg University of Heidelberg, Department of Economics May 19, 2008
Series:Discussion paper series / Universität Heidelberg, Department of Economics no. 465
Discussion Paper Series / Universität <Heidelberg> / Department of Economics 465
In: Discussion paper series (no. 465)

Subjects:
Arbeitspapier
Graue Literatur
Investitionsentscheidung
Kognitive Kompetenz
Befangenheit
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Author Notes:Jörg Oechssler ; Andreas Roider ; Patrick W. Schmitz
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Summary: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.
Physical Description:Online Resource
Format:Systemvoraussetzungen: Acrobat Reader.

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