Sheraton Uptown, Albuquerque, NM, USA
Sunday, April 23 • 9:45am - 11:15am
D2C-Subjective Survival Expectation and Portfolio Choice: Evidence of Interplay between Probabilistic Reasoning and Cognitive Ability

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Conflicting views towards human cognitive processes are not new, but such discussion is often neglected in household finance. Our study then fills the gap by examining the evidence of Bayesian reasoning in predicting subjective survival probability and its impact on portfolio choice. Using data from the Health and Retirement Study, we find population-wide evidence that individuals refer to their perceived chance of survival when allocating savings to risky and riskless assets. More importantly, we find that heuristic decision-makers, predominantly individuals with limited cognitive resources, are less likely to engage in statistical inference, less efficiently encode new information, and rely on a rough guess to make an intertemporal choice.

Speakers & Presenters

Tae-Young Pak

Assistant Professor, University of Alabama

Su Hyun Shin

Assistant Professor, The University of Alabama

Sunday April 23, 2017 9:45am - 11:15am

Attendees (2)