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IQ, Trading Behavior, and PerformanceMark GrinblattUniversity of California, Los Angeles (UCLA) - Finance Area; Yale University - International Center for Finance; National Bureau of Economic Research (NBER) Matti KeloharjuAalto University Juhani T. LinnainmaaUniversity of Chicago - Booth School of Business; National Bureau of Economic Research (NBER) June 9, 2011 Journal of Financial Economics, Forthcoming CRSP Working Paper AFA 2010 Atlanta Meetings Paper EFA 2010 Frankfurt Meetings Paper Chicago Booth Research Paper No. 09-33 Abstract: We analyze whether IQ influences trading behavior, performance, and transaction costs. The analysis combines equity return, trade, and limit order book data with two decades of scores from an intelligence test administered to nearly every Finnish male of draft age. Controlling for a variety of factors, we find that high-IQ investors are less subject to the disposition effect, more aggressive about tax-loss trading, and more likely to supply liquidity when stocks experience a one-month high. High-IQ investors also exhibit superior market timing, stock-picking skill, and trade execution.
Number of Pages in PDF File: 65 Keywords: Intelligence, household finance, trading performance JEL Classification: G11, G14 working papers seriesDate posted: March 20, 2009 ; Last revised: November 17, 2011Suggested CitationContact Information
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