IQ and Stock Market Participation

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

56 Pages Posted: 2 Aug 2009 Last revised: 23 Jan 2011

Mark Grinblatt

University of California, Los Angeles (UCLA) - Finance Area; Yale University - International Center for Finance; National Bureau of Economic Research (NBER)

Matti Keloharju

Aalto University - School of Business; Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Juhani T. Linnainmaa

USC Marshall School of Business; National Bureau of Economic Research (NBER)

Date Written: October 9, 2010

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.

Keywords: Intelligence, household finance, stock market participation

JEL Classification: G11, D14

Suggested Citation

Grinblatt, Mark and Keloharju, Matti and Linnainmaa, Juhani T., IQ and Stock Market Participation (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. Available at SSRN: https://ssrn.com/abstract=1441512

Mark Grinblatt

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-1098 (Phone)
310-206-5455 (Fax)

Yale University - International Center for Finance

Box 208200
New Haven, CT 06520-8200
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Matti Keloharju

Aalto University - School of Business ( email )

P.O. Box 21210
AALTO, FI-00076
Finland
+358 40 353 8043 (Phone)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Juhani T. Linnainmaa (Contact Author)

USC Marshall School of Business ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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