Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/35082
Authors: 
Oechssler, Jörg
Roider, Andreas
Schmitz, Patrick W.
Year of Publication: 
2008
Series/Report no.: 
IZA Discussion Papers 3481
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 probabilities, 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: 
C91
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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