NEW YORK--()--As the saying goes, one becomes older and wiser. How true is that when making financial decisions? Analyzing 10 different types of credit behavior, NYU Stern Professor Xavier Gabaix, with colleagues Sumit Agarwal at the Federal Reserve Bank of Chicago, John Driscoll at the Federal Reserve Board and David Laibson at Harvard University, conclude that the least costly financial decisions occur around age 53.
According to psychological research, cognitive ability is at its height around age 20, yet financial wisdom may be low; an older person may have less cognitive ability, but more financial wisdom. These two paths cross at middle age, the authors argue, and set an optimum age for making the smartest financial decisions.
The authors also analyze regulatory regimes that may help all individuals avoid making financial mistakes including:
To read the full paper, visit: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=973790