IQ, Trading Behavior, and Performance
EFA 2010 Frankfurt Meetings Paper
65 Pages Posted: 20 Mar 2009 Last revised: 17 Nov 2011
Date Written: June 9, 2011
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.
Keywords: Intelligence, household finance, trading performance
JEL Classification: G11, G14
Suggested Citation: Suggested Citation