<<Maybe investing in mutual funds, rather than individual stocks, is
especially advisable for seniors.>
It seems like a good idea for most juniors, too.

John Cowart

"Ron Peterson" <ron[at]shell.core.com> wrote
- quote -

The paper said the numbers were risk-adjusted in some way: "The economic
costs of aging are significant - older investors earn roughly 2% lower
annual returns on a risk-adjusted basis."

This "paper" is only a "working paper." It has not been accepted by a
journal for publishing. It has not been peer-reviewed. Might be worth
waiting for the peer-reviewed version to come out.

After failing to be able to download from the aforementioned site, I googled
and found a downloadable version at http://www.nd.edu/~gkorniot/ . The data
sample appears to be large. If this makes it to publication, I wouldn't
dismiss it, though it may be only of academic interest.

beliavsky[at]aol.com wrote:
- quote -

The paper also claims a correlation between education and investment
returns.

The paper is guessing at its data, so I wouldn't put much stock in it.

I find that as people get older, investment advisers steer them to low
risk instruments that also have a low rate of return.

--
Ron

There is a recent paper finding that older investors (60 and above) are
worse at picking stocks than younger investors due to declining
cognitive abilities. Maybe investing in mutual funds, rather than
individual stocks, is especially advisable for seniors.

http://papers.ssrn.com/sol3/papers.c...ract_id=767125
Does Investment Skill Decline due to Cognitive Aging or Improve with
Experience?
GEORGE M. KORNIOTIS
University of Notre Dame - Department of Finance & Business Economics
ALOK KUMAR
University of Notre Dame - Mendoza College of Business
July 2005
Abstract:
This study focuses on the stock investment choices of older investors.
Consistent with the theoretical predictions of life-cycle and learning
models, we find that older and more experienced investors hold less
risky portfolios, exhibit stronger preference for diversification,
trade less frequently, and exhibit greater propensity for year-end
tax-loss selling. However, consistent with the psychological evidence
on cognitive aging, we find that: (i) older investors have worse stock
selection ability and poor diversification skill, and (ii) these
adverse aging effects are stronger among older investors who are
relatively less educated, earn lower income, and belong to a minority
ethnic group. The economic costs of aging are significant - older
investors earn roughly 2% lower annual returns on a risk-adjusted
basis. Collectively, our results are consistent with the hypothesis
that older investors' portfolio choices reflect greater knowledge
about investing but their investment skill deteriorates with age due
to declining cognitive abilities.