People With Higher IQs are More Patient in Financial Matters

by VR Sreeraman on  July 5, 2007 at 4:49 PM Research News   - G J E 4
People With Higher IQs are More Patient in Financial Matters
A study by scientists at the University of Bonn and the Institute for the Study of Labour has revealed that intelligent people are more patient in financial matters.

In the study of 1000 adults in Germany, the researcher asked the respondents if someone gave them the choice of 100 euros today or 150 euros in a year's time, which sum would they take?

The researchers measured the cognitive abilities of the participants, using two different methods. The result was that intelligent people prefer to wait for a higher return, rather than going for the money now.

This is the first time that this relationship between intelligence and patience in financial matters has been shown. Furthermore, the willingness to run risks increases with higher intelligence.

Scientists gave the test subjects 100 euros. The participants could put this amount straight into their pockets. However, they could also invest it for a year at a guaranteed fixed rate of interest. In this way the 100 euros would become, for example, 105, 120 or 150 euros. In an experiment the candidates were supposed to decide what the minimum amount would have to be in a year's time for it to be worth waiting longer for.

"The more intelligent the test subjects were, the more patient and tolerant of risk they were," is how the Bonn Professor of Economics, Dr. Armin Falk, sums the results up.

In conjunction with his colleagues Dr. Thomas Dohmen, Dr. Uwe Sunde and Dr. David Huffman at the IZA, Professor Falk was able to prove that the link between patience and cognitive abilities is even valid if the income factor is taken into account.

"What's more, according to our analysis, other indirect factors of influence can be excluded as an explanation," Professor Falk emphasised.

Instead, intelligence, patience and risk tolerance seem to be closely interconnected -- and probably for a good reason. In order to be able to assess a risk correctly or to have a successful strategy in the long term, it is necessary to be able to recognise how things are interconnected.

"Anyone who does not have this ability may be better advised to follow the principle of 'A bird in the hand is worth two in the bush,'" Professor Falk said.

However, someone who is intelligent seems to be twice favoured, according to the results of the Bonn study. On the one hand, they can be more successful, due to their cognitive abilities, than their less intelligent contemporaries. On the other hand, they are generally more tolerant of risk and more patient -- two character traits which research shows contribute additionally to success at the workplace.

Source: ANI

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