COGNITIVE CONSTRAINTS ON VALUING ANNUITIES

• 成果类型: Article
• 署名作者: Brown, Jeffrey R.; Kapteyn, Arie; Luttmer, Erzo F. P.; Mitchell, Olivia S.
• 署名单位: University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital; University of Southern California; Dartmouth College; University of Pennsylvania
• 刊物名称: JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION
• ISSN/ISSBN: 1542-4766
• DOI: 10.1093/jeea/jvw009
• 发表日期: 2017
• 页码: 429-462
• 关键词: financial literacy; market participation; portfolio choice; asset allocation; life annuities; annuitization; retirement; mortality; DECISION; GENDER

摘要

This paper documents consumers' difficulty valuing life annuities. Using a purpose-built experiment in the American Life Panel, we show that the prices at which people are willing to buy annuities are substantially below the prices at which they are willing to sell them. We also find that buy values are negatively correlated with sell values and that the sell-buy valuation spread is negatively correlated with cognition. This spread is larger for those with less education, weaker numerical abilities, and lower levels of financial literacy. Our evidence contributes to the emerging literature on heterogeneity in financial decision-making abilities, particularly regarding retirement payouts.