We study whether older adults correctly perceive their cognitive decline and the potential financial consequences of misperception. First, we show that older adults tend to underestimate their cognitive decline. We then show that those who experience severe decline without being aware of it are more likely to experience wealth losses. These losses largely reflect a decline in financial wealth and are mainly suffered by the richest people who were previously active in the stock market. Our results support the idea that financial losses among older adults unaware of their cognitive decline are the result of poor financial decisions and not rational divestment strategies.
It’s from a recently published JPE article by Fabrizio Mazzonna and Franco Peracchi. Here’s something less closed versions of the journal.
