Differences in behavioral finance biases based on college students' cognitive reflection

The study explored whether differences existed between financial behavioral biases and college students' level of cognitive reflection. Previous researchers have found that differences existed between certain behavioral biases, such as risk preferences, time preferences, and overconfidence, and cognitive reflection. The study examined previously studied biases, base-rate neglect and overconfidence, and previously unexplored biases, mental accounting and exponential growth bias. The study improves upon previous research by utilizing an updated seven question cognitive reflection test that has shown improved reliability.;Using an online survey, the study collected data from college students across the United States and utilized controls to limit biased responses. Kruskal-Wallis, chi-square, and ANOVA tests were used to examine if differences existed between each behavioral finance bias and college students' level of cognitive reflection. The study did not find that a statistically significant difference existed between cognitive reflection and base-rate neglect. The study found a significant association between cognitive reflection level and overconfidence, indicating that individuals with low cognitive reflection were at the greatest risk of exhibiting overconfidence. The results also found a significant association between cognitive reflection and mental accounting, indicating that individuals with moderate cognitive reflection were at the greatest risk of exhibiting the sunk cost effect. A significant difference was found between cognitive reflection and exponential growth bias, indicating that individuals with high cognitive reflection underestimated future value growth less than individuals with low cognitive reflection. Demographic control variables were examined to determine if findings persisted.;Finally, the results were compared to previous researchers' findings. The study's results were contrary with previous findings regarding base-rate neglect. For overconfidence, the study's findings were consistent with previous research for the low cognitive reflection group and contrary with previous research for the high cognitive reflection group.