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We study the relation between cognitive abilities and stockholding using the recent of Health, Ageing and Retirement in Europe (SHARE), which has detailed data on and portfolio composition of individuals aged 50+ in 11 European countries and indicators of cognitive abilities: mathematical, verbal fluency, and recall skills. We find that the propensity to invest in stocks is strongly associated with cognitive abilities, for both direct stock market participation and indirect participation through mutual funds and retirement accounts. Since the decision to invest in less information-intensive (such as bonds) is less strongly related to cognitive abilities, we conclude that the between cognitive abilities and stockholding is driven by information, rather than by features of preferences or psychological traits.
Christelis et al. (Fri,) studied this question.