Cognitive Ability and Portfolio Choice

We study the relation between cognitive abilities and stockholding using the recent
\nSurvey of Health, Ageing and Retirement in Europe (SHARE), which has detailed data on
\nwealth and portfolio composition of individuals aged 50+ in 11 European countries and
\nthree indicators of cognitive abilities: mathematical, verbal fluency, and recall skills. We
\n find that the propensity to invest in stocks is strongly associated with cognitive abilities,
\n for both direct stock market participation and indirect participation through mutual
\n funds and retirement accounts. Since the decision to invest in less information-intensive
\nassets (such as bonds) is less strongly related to…