Smart money
Subtitle: the effect of education, cognitive ability, and financial literacy on financial market participation
By: Shawn Cole, Gauri Kartini Shastry
Contributors: Shastry, Gauri Kartini; Harvard Business School
Series: Working paper / Harvard Business School -- 09-071; Working paper (Harvard Business School) -- 09-071
Publisher: Harvard Business School
Published: 2009
Place of publication: Boston]
Language: eng
Number of pages: 56
Description: Household financial market participation affects asset prices and household welfare. Yet, our understanding of the participation decision is limited. Using an instrumental variables strategy and dataset new to this literature, we provide the first precise, causal estimates of the effects of education on financial market participation. We find a large effect, even con trolling for income. Examining mechanisms, we demonstrate that cognitive ability increases participation; however, and in contrast to previous research, financial literacy education does not affect decisions. We conclude by discussing how education may affect decision-making through: personality, borrowing behavior, discount rates, risk-aversion, and the influence of employers and neighbors.
Notes: "Revised February 2009"--Publisher's website.

Includes bibliographical references.