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IQ and Stock Market ParticipationMark 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) October 9, 2010 AEA 2010 Atlanta Meetings Paper CRSP Working Paper Western Finance Association 2010 Meetings Paper Journal of Finance, Forthcoming Chicago Booth Research Paper No. 09-27 Abstract: Stock market participation is monotonically related to IQ, controlling for wealth, income, age, and other demographic and occupational information. The high correlation between IQ, measured early in adult life, and participation, exists even among the affluent. Supplemental data from siblings, studied with an instrumental variables approach and regressions that control for family effects, demonstrate that IQ’s influence on participation extends to females and does not arise from omitted familial and non-familial variables. High-IQ investors are more likely to hold mutual funds and larger numbers of stocks, experience lower risk, and earn higher Sharpe ratios. We discuss implications for policy and finance research.
Number of Pages in PDF File: 56 Keywords: Intelligence, household finance, stock market participation JEL Classification: G11, D14 Accepted Paper SeriesDate posted: August 2, 2009 ; Last revised: January 23, 2011Suggested CitationContact Information
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