Fabrizio Mazzonna (Università della Svizzera italiana)

We investigate whether people correctly perceive their own cognitive decline, and the potential financial consequences of misperception. First, we document that older people tend to underestimate their own cognitive decline. Then, we show that individuals who experience a severe cognitive decline, but are unaware of it, are more likely to experience wealth losses. These losses largely reflect decreases in financial wealth and are mainly experienced by wealthier individuals, unaware of their declining memory, who were previously active on the stock market. Our findings support the view that financial losses among unaware respondents reflect bad financial decisions, not rational disinvestment strategies.