The age of reason
Subtitle: financial decisions over the lifecycle
By: Sumit Agarwal ... [et al.].
Contributors: Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 07-11; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 07-11.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Number of pages: 43
Description: The sophistication of financial decisions varies with age: middle-aged adults borrow at lower interest rates and pay fewer fees compared to both younger and older adults. We document this pattern in ten financial markets. The measured effects can not be explained by observed risk characteristics. The sophistication of financial choices peaks at about age 53 in our cross-sectional data. Our results are consistent with the hypothesis that financial sophistication rises and then falls with age, although the patterns that we observe represent a mix of age effects and cohort effects. Keywords: Household finance, behavioral finance, behavioral industrial organization, aging, shrouding, auto loans, credit cards, fees, home equity, mortgages. JEL Classifications: D1, D4, D8, G2, J14.
Notes: "March 15, 2007." -- "Current version: March 19, 2007"--p. 1.

Statement of responsibility on t.p. reads: Sumit Agarwal, John Driscoll, Xavier Gabaix and David Laibson.

Includes bibliographical references (p. 36-39).

Abstract in HTML and working paper for download in PDF available via World Wide Web at the Social Science Research Network.