Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/127285 
Year of Publication: 
2009
Series/Report no.: 
Discussion Paper Series No. 465
Publisher: 
University of Heidelberg, Department of Economics, Heidelberg
Abstract: 
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.
Subjects: 
behavioral finance
biases
cognitive abilities
cognitive reflection test
JEL: 
J24
D90
D80
C91
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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