Cognitive Abilities and Behavioral Biases

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper Series ; No. 465

Classification and Topics

• Classification: Wirtschaft ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Micro-Based Behavioral Economics: General‡ ; Information, Knowledge, and Uncertainty: General ; Design of Experiments: Laboratory, Individual
• Subject: behavioral finance ; biases ; cognitive abilities ; cognitive reflection test ; Anlageverhalten ; Verhaltensökonomik ; Kognition ; Entscheidung ; Test

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Oechssler, Jörg ; Roider, Andreas ; Schmitz, Patrick W.
• Event: Veröffentlichung
• (who): University of Heidelberg, Department of Economics
• (where): Heidelberg
• (when): 2009

Further information

• DOI: doi:10.11588/heidok.00009463
• Handle: http://hdl.handle.net/10419/127285
• URN: urn:nbn:de:bsz:16-opus-94635
• Last update: 10.03.2025, 11:42 AM CET