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Numerical Ability Correlated with Mortgage Delinquency

Based on analysis of the payment history of 339 subprime loans and a measure of the "numerical ability" of the borrowers, economists have concluded that people who struggle with mathematics are more likely to fall behind on their mortgages than those who don't.

In the study, published in Proceedings of the National Academy of Sciences, Kristopher Gerardi (Federal Reserve Bank of Atlanta), Lorenz Goette (University of Lausanne), and Stephan Meier (Columbia University) assessed borrowers' math skills via a five-question test. One question: Can you figure out how much a $300 sofa would cost during a half-price sale?

Researchers ultimately found that "mortgage delinquency seems specifically associated with [numerical ability], not with general IQ levels or economic literacy."

Read the story in the Los Angeles Times.

 
Id: 
1524
Start Date: 
Thursday, July 11, 2013

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